CHAPTER 1 — THE INFORMATION SYSTEM: 22.

Under SOX legislation auditors are no longer

AN ACCOUNTANT’S PERSPECTIVE allowed to provide consulting services to their
clients.
TRUE/FALSE (True – Red)
MULTIPLE CHOICES
1. Information is a business resource.
2. An information system is an example of a natural 1. Which of the following is not a business resource?
system. a. raw material
3. Transaction processing systems convert non- b. labor
financial transactions into financial transactions. c. information
4. Information lacking reliability may still have value. d. all are business resources
5. A balance sheet prepared in conformity with GAAP 2. Which level of management is responsible for short-
is an example of discretionary reporting. term planning and coordination of activities
6. The Management Reporting System provides the necessary to accomplish organizational objectives?
internal financial information needed to manage a a. operations management
business. b. middle management
7. Most of the inputs to the General Ledger System c. top management
come from the Financial Reporting System. d. line management
8. When preparing discretionary reports, organizations 3. Which level of management is responsible for
can choose what information to report and how to controlling day-to-day operations?
present it. a. top management
9. Retrieval is the task of permanently removing b. middle management
obsolete or redundant records from the database. c. operations management
10. Systems development represents 80 to 90 percent of d. executive management
the total cost of a computer system. 4. The ability to achieve the goals of a system depends
11. The database administrator is responsible for the upon the effective functioning and harmonious
security and integrity of the database. interaction between its subsystems. This is called
12. A backbone system is completely finished, tested, a. system decomposition
and ready for implementation. b. system redundancy
13. The internal auditor represents the interests of third- c. backup system
party outsiders. d. subsystem interdependency
14. Information Technology (IT) audits can be 5. The value of information for users is determined by
performed by both internal and external auditors. all of the following but
15. The single largest user of computer services is the a. reliability
personnel function. b. relevance
16. Increased control is one of the key advantages of c. convenience
distributed data processing. d. completeness
17. The flat-file approach is most often associated with 6. An example of a nonfinancial transaction is
so-called legacy systems. a. sale of products
18. In a flat-file system, files are easily shared by users. b. cash disbursement
19. Legacy systems were eliminated in the effort to c. log of customer calls
make systems Y2K compliant. d. purchase of inventory
20. One of the greatest disadvantages of database 7. An example of a financial transaction is
systems is that all data is always available to all a. the purchase of computer
users. b. a supplier’s price list
21. Under SOX legislation auditors are no longer c. a delivery schedule
allowed to provide consulting services to audit d. an employee benefit brochure
clients.
8. Which subsystem is not part of the Accounting c. data that is redundant
Information System? d. data that is accurate
a. Transaction Processing System 14. The most basic element of useful data in the
b. Expert System database is
c. General Ledger/Financial Reporting System a. the record
d. Management Reporting System b. the key
9. The major difference between the Financial c. the file
Reporting System (FRS) and the Management d. the attribute
Reporting System (MRS) is the 15. In a database, a complete set of attributes for a single
a. FRS provides information to internal and occurrence of an entity class is called
external users; the MRS provides a. a key
information to internal users b. a file
b. FRS provides discretionary information; the c. a record
MRS provides nondiscretionary information d. a character
c. FRS reports are prepared using information 16. Effective information has all of the following
provided by the General Ledger System; the characteristics except:
MRS provides information to the General a. relevance
Ledger System b. completeness
d. FRS reports are prepared in flexible, non- c. summarization
standardized formats; the MRS reports are d. structure
prepared in standardized, formal formats 17. Database management tasks do not include
10. The purpose of the Transaction Processing System a. summarization
includes all of the following except b. storage
a. converting economic events into financial c. retrieval
transactions d. deletion
b. recording financial transactions in the 18. The author distinguishes between the Accounting
accounting records Information System and the management
c. distributing essential information to Information System based on
operations personnel to support their daily a. whether the transactions are financial or
operations nonfinancial
d. measuring and reporting the status of b. whether discretionary or nondiscretionary
financial resources and the changes in those reports are prepared
resources c. the end users of the reports
11. The Transaction Processing System includes all of d. the organizational structure of the business
the following cycles except 19. Which activity is not part of the finance function?
a. the revenue cycle a. cash receipts
b. the administrative cycle b. portfolio management
c. the expenditure cycle c. credit
d. the conversion cycle d. general ledger
12. The primary input to the Transaction Processing 20. Market research and advertising are part of which
System is business function?
a. a financial transaction a. materials management
b. an accounting record b. finance
c. an accounting report c. marketing
d. a nonfinancial transaction d. production
13. When designing the data collection activity, which
type of data should be avoided?
a. data that is relevant
b. data that is efficient
21. Which function manages the financial resources of b. internal accountants
the firm through portfolio management, banking, c. licensed auditors
credit evaluation, and cash receipts and d. third-party accountants
disbursements? 28. Which individual is least involved in new systems
a. accounting development?
b. finance a. systems analyst
c. materials management b. external auditor
d. distribution c. end user
22. Which of the following is not part of the accounting d. data librarian
function? 29. The objectives of all information systems include all
a. managing the financial information resource of the following except
of the firm a. support for the stewardship function of
b. capturing and recording transactions in the management
database b. evaluating transaction data
c. distributing transaction information to c. support for the day-to-day operations of the
operations personnel firm
d. managing the physical information system d. support for management decision making
of the firm 30. Which individuals may be involved in the Systems
23. The term “accounting independence” refers to Development Life Cycle?
a. data integrity a. accountants
b. separation of duties, such as record keeping b. systems professionals
and custody of physical resources c. end users
c. generation of accurate and timely d. all of the above
information 31. An appraisal function housed within the
d. business segmentation by function organization that performs a wide range of services
24. In the distributed data processing approach for management is
a. computer services are consolidated and a. internal auditing
managed as a shared organization resource b. data control group
b. the computer service function is a cost c. external auditing
center d. database administration
c. the end users are billed using a charge-back 32. Advantages of a database system include all of the
system following except
d. computer services are organized into small a. elimination of data redundancy
information processing units under the b. open access to all data by all users
control of end users c. single update for changes in data
25. The data control group is responsible for d. confidence that all data is current
a. performing the day-to-day processing of 33. Disadvantages of distributed data processing include
transactions all of the following except
b. security and integrity of the database a. mismanagement of organization-wide
c. liaison between the end user and data resources
processing b. hardware and software incompatibility
d. providing safe storage for off-line data files c. cost reductions
26. Data processing does not involve d. difficulty in hiring qualified IT professionals
a. data control 34. Advantages of distributed data processing include
b. computer operations each of the following except
c. system maintenance a. cost reductions
d. data conversion b. better management of organization resources
27. Independent auditing is performed by c. improved operational efficiency
a. external auditors d. increased user satisfaction
35. Disadvantages of the distributed data processing GROUP 1 QUIZ: THE INFORMATION SYSTEM: AN
approach include all of the following except ACCOUNTANT’S PERSPECTIVE
a. possible mismanagement of organization
resources PART I. MULTIPLE CHOICE
b. redundancy of tasks
c. software incompatibility 1. The information system supplies managers with the
d. system is not responsive to the user’s information they need to carry out their decision-
situation making responsibilities. This is under which of the
36. ERP packages include all of the following modules following Information System Objectives?
except a. To support the stewardship function of
a. human resources management
b. general ledger b. To support management decision making
c. inventory management c. To support the firm’s day-to-day operations
d. they include all of the above 2. If a vital subsystem fails or becomes
37. All of the following are external end users except defective and can no longer meet its
a. cost accountants specific objective, the overall system
b. creditors will fail to meet its objective.
c. stockholders a. Information System
d. tax authorities b. System Interdependency
38. Useful information must possess all of the following c. System Relation
characteristics except d. Transaction Processing System
a. relevance 3. Employment and payment of staff salaries is under
b. timelessness this cycle.
c. accuracy a. Human Resources Cycles
d. completeness b. Expenditure Cycles
39. The objectives of an information system include c. Financing Cycles
each of the following except d. Revenue Cycles
a. support for the stewardship responsibilities 4. Under this model, users have access to the
of management resource they need which is controlled by a
b. furthering the financial interests of database management system.
shareholders a. Flat-file limit data integration
c. support for management decision making b. Data-base model
d. support for the firm’s day-to-day operations c. REA model
40. Accountants play many roles relating to the d. ERP model
accounting information system, including all of the 5. Under this model business organizations
following except prepare financial statements directly from the
a. system users event database.
b. system designers a. Flat-file limit data integration
c. system auditors b. Data-base model
d. system converters c. REA model
d. ERP model
6. They are from inside and outside the
organization with discretionary power to
use or dispose of economic resources.
a. Manager
b. Accountant
c. Auditor
d. Agent
7. Which of the following is not a disadvantage of 14. The organizations that engage in in-house
distributed data processing? development are smaller companies and larger
a. Mismanagement of organization-wide firms that have standardized information needs.
resources a. True
b. By entering and editing data at the IPU data b. False
conversion and control cost reduces. 15. Under the distributed data processing model, all data
c. Autonomous systems development processing is performed by one or more large
activities distributed throughout the firm computers housed at a central site that serve users
can result in each user area reinventing throughout the organization.
the wheel. a. True
1. The potential for hardware and b. False
software incompatibility across
the organization is increased. Group 1
1. What are the transaction cycles under
PART II. TRUE or FALSE Transaction Processing System (TPS)?
a. Expenditure cycle, production cycle, human
8. Management Reporting System communicates resource cycle
information through non-discretionary type of b. Revenue cycle, human resource cycle,
financing cycle
reporting.
c. Expenditure cycle, human resource cycle,
a. True
financing cycle
b. False d. Revenue cycle, financing cycle, Expenditure
9. Decomposition is the process of dividing the system cycle
into smaller subsystem parts.
a. True 2. It exists due to the idea of distribution of work
b. False across the large system hence allowing each
10. The design of the physical system involves group to specialize in their work.
specifying the criteria for identifying delinquent a. System Decomposition
customers and the information that needs to be b. Subsystem Interdependency
reported while conceptual system is the medium and c. Modularity
d. Coupling
method for capturing and presenting the information.
a. True
3. The set of formal procedures by which data are
b. False
collected, processed into information and
11. Logic of a business process is more distributed to users.
easily understood when it is not a. Information
shrouded by technology. b. System
a. True c. Information System
b. False d. Accounting Information System
12. All firms use more than one method of
segmentation. 4. Which of the following is not a subsystem of
a. True Accounting Information System?
b. False a. Transaction Processing System
13. Information independence rests heavily on the b. General Ledger Systems
c. Management Reporting System
concept of accounting reliability.
d. Management Information System
a. True
b. False
5. These are completely finished and tested
systems that are ready for implementation
a. Turnkey System
b. Backbone System
c. Vendor supported System
 d. Personalized System a. System user
b. System auditor
6. Which of the following is not an information c. System designer
system objective? d. System programmer
a. To support the stewardship function of the
management 13. The following are models of information
b. To support customer’s decision making system, which one is NOT?
c. To support the firm’s day-to-day operations a. Manual process model
d. None of the above b. Database approach model
c. Flat table model
7. A characteristic of a useful information wherein d. ERP Model
information must be aggregated in accordance
with the user’s needs 14. Statement 1: Flat Table model is an accounting
a. Accuracy framework for modeling an organizations
b. Completeness critical resources, events and agents and the
c. Summarized relationship between them.
d. Relevance Statement 2: REA model is an information
system model that enables an organization to
8. The organization’s physical repository for automate and integrate its key business
financial and nonfinancial data processes
a. Data a. Statement 1 is true, Statement 2 is false
b. Information b. statement 1 is false, statement 2 is true
c. Database c. Both are true
d. Files d. Both are false

9. It monitors the manufacturing process at various 15. This system determines the nature of the
points to ensure that the finished products meet information required, its sources, its destination,
the firm’s quality standards. and the accounting rules that must be applied.
a. REA model system
a. Production Planning
b. Manual model system
b. Maintenance
c. Quality Control c. Database approach system
d. Materials Management d. Conceptual system

10. Accounting function manages the financial

information resource. The value of information
to a user is determined by its
a. Relevance
b. Reliability
c. Accuracy
d. Timeliness

11. It manages the computer resources used to

perform the day-to-day processing of
transactions. It may consist of the following
functions: data control, data conversion,
computer operations, and the data library.
a. Data Processing
b. Centralized Data Processing
c. Distributed Data Processing
d. Systems Development

12. Which is NOT an accountant’s primary role in

information systems?
CHAPTER 2 — INTRODUCTION TO 21. Real-time processing in systems that handle large
TRANSACTION PROCESSING volumes of transactions each day can create
operational inefficiencies.
TRUE/FALSE (True – Red) 22. Operational inefficiencies occur because accounts
unique to many concurrent transactions need to be
1. Processing more transactions at a lower unit cost updated in real time.
makes batch processing more efficient than real-time 23. Operational inefficiencies occur because accounts
systems. common to many concurrent transactions need to be
2. The process of acquiring raw materials is part of the updated in real time.
conversion cycle. 24. Batch processing of noncritical accounts improves
3. Directing work-in-process through its various stages operational efficiency.
of manufacturing is part of the conversion cycle. 25. Batch processing of accounts common to many
4. The top portion of the monthly bill from a credit concurrent transactions reduces operational
card company is an example of a turn-around efficiency.
document.
5. The general journal is used to record recurring MULTIPLE CHOICES
transactions that are similar in nature.
6. Document flowcharts are used to represent systems 1. Which system is not part of the expenditure cycle?
at different levels of detail. a. cash disbursements
7. Data flow diagrams represent the physical system. b. payroll
8. Document flowcharts are often used to depict c. production planning/control
processes that are handled in batches. d. purchases/accounts payable
9. Program flowcharts depict the type of media being 2. Which system produces information used for
used (paper, magnetic tape, or disks) and terminals. inventory valuation, budgeting, cost control,
10. System flowcharts represent the input sources, performance reporting, and make-buy decisions?
programs, and output products of a computer a. sales order processing
system. b. purchases/accounts payable
11. Program flowcharts are used to describe the logic c. cash disbursements
represented in system flowcharts. d. cost accounting
12. Batch processing systems can store data on direct 3. Which of the following is a turn-around document?
access storage devices. a. remittance advice
13. Backups are automatically produced in a direct b. sales order
access file environment. c. purchase order
14. The box symbol represents a temporary file. d. payroll check
15. Auditors may prepare program flowcharts to verify 4. The order of the entries made in the ledger is by
the correctness of program logic. a. transaction number
16. A control account is a general ledger account which b. account number
is supported by a subsidiary ledger. c. date
17. The most significant characteristic of direct access d. user
files is access speed. 5. The order of the entries made in the general journal
18. Real time processing is used for routine transactions is by
in large numbers. a. date
19. Batch processing is best used when timely b. account number
information is needed because this method processes c. user
data efficiently. d. customer number
20. An inverted triangle with the letter “N” represents a
file in “name” order.
6. In general a special journal would not be used to d. inform the bank of electronic funds deposits
record 14. Which type of graphical documentation represents
a. sales systems at different levels of detail?
b. cash disbursements a. data flow diagram
c. depreciation b. document flowchart
d. purchases c. system flowchart
7. Which account is least likely to have a subsidiary d. program flowchart
ledger? 15. Data flow diagrams
a. sales a. depict logical tasks that are being
b. accounts receivable performed, but not who is performing them
c. fixed assets b. illustrate the relationship between processes,
d. inventory and the documents that flow between them
8. Subsidiary ledgers are used in manual accounting and trigger activities
environments. What file is comparable to a c. represent relationships between key
subsidiary ledger in a computerized environment? elements of the computer system
a. archive file d. describe in detail the logic of the process
b. reference file 16. Document flowcharts
c. transaction file a. depict logical tasks that are being
d. master file performed, but not who is performing them
9. A journal is used in manual accounting b. illustrate the relationship between processes,
environments. What file is comparable to a journal and the documents that flow between them
in a computerized environment? and trigger activities
a. archive file c. represent relationships between key
b. reference file elements of the computer system
c. transaction file d. describe the logic of the process
d. master file 17. When determining the batch size, which
10. In a computerized environment, a list of authorized consideration is the least important?
suppliers would be found in the a. achieving economies by grouping together
a. master file large numbers of transactions
b. transaction file b. complying with legal mandates
c. reference file c. providing control over the transaction
d. archive file process
11. Which of the following is an archive file? d. balancing the tradeoff between batch size
a. an accounts payable subsidiary ledger and error detection
b. a cash receipts file 18. In contrast to a real-time system, in a batch
c. a sales journal processing system
d. a file of accounts receivable that have been a. there is a lag between the time when the
written off economic event occurs and the financial
12. Which document is not a type of source document? records are updated
a. a sales order b. relatively more resources are required
b. an employee time card c. a greater resource commitment per unit of
c. a paycheck output is required
d. a sales return receipt d. processing takes place when the economic
13. The most important purpose of a turn-around event occurs
document is to
a. serve as a source document
b. inform a customer of the outstanding
amount payable
c. provide an audit trail for the external auditor
19. In contrast to a batch processing system, in a real- 26. The characteristics that distinguish between batch
time system and real-time systems include all of the following
a. a lag occurs between the time of the except
economic event and when the transaction is a. time frame
recorded b. resources used
b. relatively fewer hardware, programming, c. file format
and training resources are required d. efficiency of processing
c. a lesser resource commitment per unit of 27. A file that stores data used as a standard when
output is required processing transactions is
d. processing takes place when the economic a. a reference file
event occurs b. a master file
20. The type of transaction most suitable for batch c. a transaction file
processing is d. an archive file
a. airline reservations 28. Sequential storage means
b. credit authorization a. data is stored on tape
c. payroll processing b. access is achieved through an index
d. adjustments to perpetual inventory c. access is direct
21. The type of transaction most suitable for real-time d. reading record 100 requires first reading
processing is records 1 to 99
a. recording fixed asset purchases 29. Real-time processing would be most beneficial in
b. recording interest earned on long-term handling a firm’s
bonds a. fixed asset records
c. adjusting prepaid insurance b. retained earnings information
d. recording a sale on account c. merchandise inventory
22. Which step is not found in batch processing using d. depreciation records
sequential files? 30. Which accounting application is least suited for
a. control totals batch processing?
b. sort runs a. general ledger
c. edit runs b. vendor payments
d. immediate feedback of data entry errors c. sales order processing
23. Both the revenue and the expenditure cycle can be d. payroll
viewed as having two key parts. These are 31. Which accounting application is best suited for batch
a. manual and computerized processing?
b. physical and financial a. general ledger
c. input and output b. vendor payments
d. batch and real-time c. sales order processing
24. All of the following can provide evidence of an d. payroll
economic event except 32. Operational inefficiencies occur because
a. source document a. Accounts both common and unique to many
b. turn-around document concurrent transactions need to be updated
c. master document in real time.
d. product document b. Accounts common to many concurrent
25. Which method of processing does not use the transactions need to be updated in real time.
destructive update approach? c. Accounts unique to many concurrent
a. batch processing using direct access files transactions need to be updated in real time.
b. real-time processing d. None of the above are true statements
c. batch processing using sequential files
d. all of the above use the destructive update
approach
33. Operational efficiencies can be improved by d. It allows for the insertion of the new codes
a. Updating accounts both common and unique within the group without having to
to many concurrent transactions in real time. reorganize the entire coding structure
b. Updating accounts both common and unique 10. Batch processing offers general advantage/s which
to many concurrent transactions in batch is/are:
mode. a. Organizations improve operational
c. Updating accounts unique to many efficiency by grouping together large
concurrent transactions in real time and numbers of transactions into batches and
updating common accounts in batch mode. processing them as a unit of work
d. None of the above are true statements b. Batch processing provides control over the
transaction process
NOTE: FIGURE QUESTIONS NOT INCLUDED c. Both A & B
d. None of the above
GROUP 2 QUIZ: INTRODUCTION TO 11. Transaction processing must be aligned with this
TRANSACTION PROCESSING kind of file. What file it is which also acts as
standard file?
1. What activities/tasks are involved in the sales order a. Master File
processing subsystem? b. Archive File
a. Sales order, granting of credit, billing, c. Reference File
deposit of cash in the bank d. Transaction File
b. Granting of credit, shipping of goods, billing 12. Which set contains the advantages of real-time data
c. Cash receipt, deposit of cash in the bank, processing?
billing a. Improved productivity, decreased lags in
d. Recording of cost of inventory, shipping customer billing, poor customer satisfaction
products, recording cash receipt, deposit of b. Increased inventory, decreased lags in
cash in the bank customer billing, reduced physical source
2. What are the two common techniques used by documents
auditors? c. Improved productivity, reduced inventory,
a. Checking and Verification increased inventory turnover
b. Sampling and Verification d. Increased inventory turnover, enhanced
c. Checking and Confirmation customer satisfaction, greater physical
d. Sampling and Confirmation source documents
8. Which is incorrect? 13. Few of its distinguishing features are they are
a. Entities: Noun mainframe-based applications, they tend to be batch
b. Processes: Transitive Verb oriented and its early systems use flat files for data
c. Data Flow: Arrows storage.
d. Data Store: Accounting Records a. Legacy Systems
9. All of the following are the advantages of using b. Modern Systems
group code as data coding scheme except: c. Batch Systems
a. It facilitates the representation of large d. Real-time Systems
amounts of diverse data 2. This coding scheme does not require the user to
b. It allows complex data structures to be memorize meaning; the code itself conveys a high
represented in a hierarchical form that is degree of information about the item that is being
logical and more easily remembered by represented.
humans a. Block Codes
c. It permits detailed analysis and reporting b. Sequential Codes
both within an item class and across c. Mnemonic Codes
d. Group Codes
3. What is a product document that becomes a source Group 2
document for another system?
1. Which system is not part of the expenditure
a. Product Document
cycle?
b. Source Document
a. Cash Disbursements
c. Turnaround Document
b. Payroll
d. Secondary Document c. Production Planning
4. All of the following are the basic documentation d. Accounts Payable
techniques, except: 2. An economic event that affects the assets and
a. Data flow diagrams equities of the firm, is reflected in its
b. Systematic flowcharts accounts, and is measured in monetary terms.
c. Record layout diagrams a. Accounting transaction
d. Entity relationship diagrams b. Business transaction
5. Which of the following correctly illustrates the steps c. Financial transaction
on batch processing using sequential file? d. General Transaction
a. Keystroke, Sort Run, Edit Run, Update Run, 3. All of the following are transaction cycles,
except:
Backup Procedure
a. Revenue Cycle
b. Keystroke, Backup Procedure, Edit Run,
b. Conversion Cycle
Sort Run, Update Run
c. Expenditure Cycle
c. Keystroke, Edit Run, Sort Run, Update Run, d. Accounting Cycle
Backup Procedure 4. Are product documents of one
d. Keystroke, Edit Run, Sort Run, Backup system that become source
Procedure, Update Run documents for another system.
6. What is the step-by-step record that is useful in the a. Product document
process of tracing the source of certain financial b. Source document
information presented in the financial statements to c. Turnaround Document
verify the information’s accuracy and reliability? d. Accounting document
a. Audit Trek 5. Accounting records in computer-based
b. Audit Trail systems are represented by four different
types of magnetic files, except:
c. Verification
a. Master file
d. Audit Tracing
b. Reference File
7. Statement 1: All symbols on the flowchart should be
c. Archive File
labeled.
d. None of the above
Statement 2: The correct symbols should be used to
6. Is a temporary file of transaction records
represent the various entities in the system.
used to change or update data in a
Statement 3: Lines should have two arrowheads to
master file.
clearly show the process flow and sequence of
a. Master File
events.
b. Transaction file
a. All statements are true
c. Reference file
b. All statements are false d. Archive file
c. Two statements are false 7. The most important purpose of a turn-around
d. Two statements are true document is to
15. Relationship can be the following, except: a. serve as a source document
a. 1:1 b. inform a customer of the outstanding
b. 1:M amount payable
c. M:1 c. provide an audit trail for the external
d. M:M auditor
d. inform the bank of electronic funds
deposits
8. Data flow diagrams
a. depict logical tasks that are being
 performed, but not who is 13. Which symbol represents a decision? D
performing them
b. illustrate the relationship between a.
processes, and the documents that
flow between them and trigger
activities b.
c. represent relationships between key
elements of the computer system
d. describe in detail the logic of the
process c.
9. Real-time processing would be most beneficial
in handling a firm’s .
a. fixed asset records d.
b. merchandise inventory
c. retained earning information
d. depreciation records.
10. Which accounting application is best suited to 14. Which symbol represents a terminal start or
batch processing? end of an operation? B
a. General ledger
b. Updating inventory reductions to the a.
subsidiary ledger
c. Sales order processing
d. Credit checking
11. Which symbol represents a magnetic tape? C b.
a.

c.
b.

d.
c.

15. Which symbol represents an input or output

operation? C
d.
a.

12. Which symbol represents a document? A b.

a.
c.

b.
d.

c.

d.
CHAPTER 3 — ETHICS, FRAUD, AND 19. A key modifying assumption in internal control is
INTERNAL CONTROL that the internal control system is the responsibility
of management.
TRUE/FALSE (True – Red) 20. Database management fraud includes altering,
updating, and deleting an organization’s data.
1. The ethical principle of justice asserts that the 21. While the Sarbanes-Oxley Act prohibits auditors
benefits of the decision should be distributed fairly from providing non-accounting services to their
to those who share the risks. audit clients, they are not prohibited from
2. The ethical principle of informed consent suggests performing such services for non-audit clients or
that the decision should be implemented so as to privately held companies
minimize all of the risks and to avoid any 22. The Sarbanes-Oxley Act requires the audit
unnecessary risks. committee to hire and oversee the external auditors.
3. Employees should be made aware of the firm’s 23. Section 404 requires that corporate management
commitment to ethics. (including the CEO) certify their organization’s
4. Business ethics is the analysis of the nature and internal controls on a quarterly and annual basis.
social impact of computer technology, and the 24. Section 302 requires the management of public
corresponding formulation and justification of companies to assess and formally report on the
policies for the ethical use of such technology. effectiveness of their organization’s internal
5. Para computer ethics is the exposure to stories and controls.
reports found in the popular media regarding the 25. The objective of SAS 99 is to seamlessly blend the
good or bad ramifications of computer technology. auditor’s consideration of fraud into all phases of the
6. Source code is an example of intellectual property. audit process.
7. Copyright laws and computer industry standards
have been developed jointly and rarely conflict. MULTIPLE CHOICES
8. Business bankruptcy cases always involve
fraudulent behavior. 1. Which ethical principle states that the benefit from a
9. Defalcation is another word for financial fraud. decision must outweigh the risks, and that there is no
10. The trend toward distributed data processing alternative decision that provides the same or greater
increases the exposure to fraud from remote benefit with less risk?
locations. a. minimize risk
11. The external auditor is responsible for establishing b. justice
and maintaining the internal control system. c. informed consent
12. Segregation of duties is an example of an internal d. proportionality
control procedure. 2. Individuals who acquire some level of skill and
13. Controls in a computer-based information system knowledge in the field of computer ethics are
are identical to controls in a manual system. involved in which level of computer ethics?
14. Preventive controls are passive techniques designed a. para computer ethics
to reduce fraud. b. pop computer ethics
15. Ethical issues and legal issues are essentially the c. theoretical computer ethics
same. d. practical computer ethics
16. Internal control systems are recommended but not 3. All of the following are issues of computer security
required of firms subject to the Foreign Corrupt except
Practices Act. a. releasing incorrect data to authorized
17. Operations fraud is the misuse or theft of the firm’s individuals
computer resources. b. permitting computer operators unlimited
18. The Foreign Corrupt Practices Act requires only that access to the computer room
a firm keep good records. c. permitting access to data by unauthorized
individuals
 d. providing correct data to unauthorized 10. Who is responsible for establishing and maintaining
individuals the internal control system?
4. Which characteristic is not associated with software a. the internal auditor
as intellectual property? b. the accountant
a. uniqueness of the product c. management
b. possibility of exact replication d. the external auditor
c. automated monitoring to detect intruders 11. The concept of reasonable assurance suggests that
d. ease of dissemination a. the cost of an internal control should be less
5. For an action to be called fraudulent, all of the than the benefit it provides
following conditions are required except b. a well-designed system of internal controls
a. poor judgment will detect all fraudulent activity
b. false representation c. the objectives achieved by an internal
c. intent to deceive control system vary depending on the data
d. injury or loss processing method
6. One characteristic of employee fraud is that the d. the effectiveness of internal controls is a
fraud function of the industry environment
a. is perpetrated at a level to which internal 12. Which of the following is not a limitation of the
controls do not apply internal control system?
b. involves misstating financial statements a. errors are made due to employee fatigue
c. involves the direct conversion of cash or b. fraud occurs because of collusion between
other assets to the employee’s personal two employees
benefit c. the industry is inherently risky
d. involves misappropriating assets in a series d. management instructs the bookkeeper to
of complex transactions involving third make fraudulent journal entries
parties 13. The most cost-effective type of internal control is
7. Forces which may permit fraud to occur do not a. preventive control
include b. accounting control
a. a gambling addiction c. detective control
b. lack of segregation of duties d. corrective control
c. centralized decision making environment 14. Which of the following is a preventive control?
d. questionable integrity of employees a. credit check before approving a sale on
8. Which of the following best describes lapping? account
a. applying cash receipts to a different b. bank reconciliation
customer’s account in an attempt to conceal c. physical inventory count
previous thefts of funds d. comparing the accounts receivable
b. inflating bank balances by transferring subsidiary ledger to the control account
money among different bank accounts 15. A well-designed purchase order is an example of a
c. expensing an asset that has been stolen a. preventive control
d. creating a false transaction b. detective control
9. Operations fraud includes c. corrective control
a. altering program logic to cause the d. none of the above
application to process data incorrectly 16. A physical inventory count is an example of a
b. misusing the firm’s computer resources a. preventive control
c. destroying or corrupting a program’s logic b. detective control
using a computer virus c. corrective control
d. creating illegal programs that can access d. feedforward control
data files to alter, delete, or insert values
17. The bank reconciliation uncovered a transposition c. separates the duties of data entry and report
error in the books. This is an example of a generation
a. preventive control d. records all financial transactions promptly
b. detective control 23. Which of the following is the best reason to separate
c. corrective control duties in a manual system?
d. risk minimization a. to avoid collusion between the programmer
e. proportionality and the computer operator
18. In balancing the risks and benefits that are part of b. to ensure that supervision is not required
every ethical decision, managers receive guidance c. to prevent the record keeper from
from each of the following except authorizing transactions
a. justice d. to enable the firm to function more
b. self interest efficiently
c. risk minimization 24. Segregation of duties in the computer-based
d. proportionality information system includes
19. Which of the following is not an element of the a. separating the programmer from the
internal control environment? computer operator
a. management philosophy and operating style b. preventing management override
b. organizational structure of the firm c. separating the inventory process from the
c. well-designed documents and records billing process
d. the functioning of the board of directors and d. performing independent verifications by the
the audit committee computer operator
20. Which of the following suggests a weakness in the 25. Which of the following is not an internal control
internal control environment? procedure?
a. the firm has an up-to-date organizational a. authorization
chart b. management’s operating style
b. monthly reports comparing actual c. independent verification
performance to budget are distributed to d. accounting records
managers 26. The decision to extend credit beyond the normal
c. performance evaluations are prepared every credit limit is an example of
three years a. independent verification
d. the audit committee meets quarterly with the b. authorization
external auditors c. segregation of functions
21. Which of the following indicates a strong internal d. supervision
control environment? 27. When duties cannot be segregated, the most
a. the internal audit group reports to the audit important internal control procedure is
committee of the board of directors a. supervision
b. there is no segregation of duties between b. independent verification
organization functions c. access controls
c. there are questions about the integrity of d. accounting records
management 28. An accounting system that maintains an adequate
d. adverse business conditions exist in the audit trail is implementing which internal control
industry procedure?
22. According to SAS 78, an effective accounting a. access controls
system performs all of the following except b. segregation of functions
a. identifies and records all valid financial c. independent verification
transactions d. accounting records
b. records financial transactions in the
appropriate accounting period
29. Employee fraud involves three steps. Of the d. access controls
following, which is not involved? 35. The office manager forgot to record in the
a. concealing the crime to avoid detection accounting records the daily bank deposit. Which
b. stealing something of value control procedure would most likely prevent or
c. misstating financial statements detect this error?
d. converting the asset to a usable form a. segregation of duties
30. Which of the following is not an example of b. independent verification
independent verification? c. accounting records
a. comparing fixed assets on hand to the d. supervision
accounting records 36. Business ethics involves
b. performing a bank reconciliation a. how managers decide on what is right in
c. comparing the accounts payable subsidiary conducting business
ledger to the control account b. how managers achieve what they decide is
d. permitting authorized users only to access right for the business
the accounting system c. both a and b
31. The importance to the accounting profession of the d. none of the above
Foreign Corrupt Practices Act of 1977 is that 37. All of the following are conditions for fraud except
a. bribery will be eliminated a. false representation
b. management will not override the b. injury or loss
company’s internal controls c. intent
c. firms are required to have an effective d. material reliance
internal control system 38. The four principal types of fraud include all of the
d. firms will not be exposed to lawsuits following except
32. The board of directors consists entirely of personal a. bribery
friends of the chief executive officer. This indicates b. gratuities
a weakness in c. conflict of interest
a. the accounting system d. economic extortion
b. the control environment 39. The characteristics of useful information include
c. control procedures a. summarization, relevance, timeliness,
d. this is not a weakness accuracy, and completeness
33. Computer fraud can take on many forms, including b. relevance, summarization, accuracy,
each of the following except timelessness, and completeness
a. theft or illegal use of computer-readable c. timeliness, relevance, summarization,
information accuracy, and conciseness
b. theft, misuse, or misappropriation of d. disaggregation, relevance, timeliness,
computer equipment accuracy, and completeness
c. theft, misuse, or misappropriation of assets 40. Internal control system has limitations. These
by altering computer-readable records and include
files a. possibility of honest error
d. theft, misuse, or misappropriation of printer b. circumvention
supplies c. management override
34. When certain customers made cash payments to d. stability of systems
reduce their accounts receivable, the bookkeeper
embezzled the cash and wrote off the accounts as
uncollectible. Which control procedure would most
likely prevent this irregularity?
a. segregation of duties
b. accounting records
c. accounting system
41. Management can expect various benefits to follow GROUP 3 QUIZ: ETHICS, FRAUD, AND INTERNAL
from implementing a system of strong internal CONTROL
control. Which of the following benefits is least
likely to occur? 16. It pertains to taking appropriate action when
a. Reduced cost of an external audit. code violations occur. What is it?
b. Prevents employee collusion to commit a. Accountability
fraud. b. Legal Compliance
c. Availability of reliable data for decision- c. Computer Security
making purposes. d. Misuse of Computers
d. Some assurance of compliance with the 17. What is the federal law that established
Foreign Corrupt Practices Act of 1977. sweeping auditing and financial regulations for
e. Some assurance that important documents public companies?
and records are protected. a. Saines-Oxley Act
42. Which of the following situations is not a b. Sarbanes-Oxley Act
segregation of duties violation? c. Sarbanes-Oakley Act
a. The treasurer has the authority to sign d. Saines-Oakley Act
checks but gives the signature block to the 18. This level of fraud does not involve the direct
assistant treasurer to run the check-signing theft of assets. What is it?
machine. a. Management Fraud
b. The warehouse clerk, who has the custodial b. Employee Fraud
responsibility over inventory in the c. Vendor Fraud
warehouse, selects the vendor and authorizes d. Shell Company Fraud
purchases when inventories are low. 19. It ensures that all material transactions processed
c. The sales manager has the responsibility to by the information system are in line with
approve credit and the authority to write off management’s objectives.
accounts. a. Independent Verification
d. The department time clerk is given the b. Accounting Records
undistributed payroll checks to mail to c. Transaction Authorization
absent employees. d. IT Controls
e. The accounting clerk who shares the record 20. The following are the three levels of computer
keeping responsibility for the accounts ethics, except:
receivable subsidiary ledger performs the a. Pop
monthly reconciliation of the subsidiary b. Hypothetical
ledger and the control account. c. Para
43. Which of the following is not an issue to be d. Theoretical
addressed in a business code of ethics required by 21. Which is not an element of the fraud triangle?
the SEC? a. Opportunity
a. Conflicts of interest b. Ethics
b. Full and Fair Disclosures c. Pressure
c. Legal Compliance d. Risk
d. Internal Reporting of Code Violations 22. What is the scheme in which an employee
e. All of the above are issues to be addressed makes a claim for reimbursement of fictitious or
inflated business expenses?
a. Non-cash Fraud
b. Computer Fraud
c. Expense Reimbursements Fraud
d. Payroll Fraud
1. It is when an employee causes the employer to 7. It is a guide of principles designed to help
issue a payment to a false supplier or vendor. professionals conduct business honestly and
a. Cash Larceny with integrity. What is it?
b. Skimming a. Ethical Standards
c. Billing Schemes b. Ethical Responsibility
d. Check Tampering c. Ethics
2. Which of the following are the five conditions d. Code of Ethics
to be met for an act to be fraudulent? 15. Materially misstating financial data and internal
a. Fabrication, Material Fact, Intent, reports is usually a fraudulent act of which level
Justifiable Reliance, Injury of management?
b. False Representation, Material Fact, a. Top Management
Intent, Justifiable Reliance, Injury b. Middle Management
c. False Representation, Material Fact, c. Lower-level Management
Intent, Unjustifiable Reliance, Injury d. Intermediate Management
d. False Representation, Substance, Intent, Group 3
Justifiable Reliance, Injury 1. Even if judged acceptable by principles, the decision
3. It involves giving, or soliciting something of should be implemented so as to __________ all of the
value because of an official act that has been risks.
taken.
a. Bribery a. Maximize
b. Conflicts of Interest b. Minimize
c. Economic Extortion c. neutralize
d. Illegal Gratuities d. ignore
4. Which of the following are the four areas of 2. Which refers to the analysis of the nature and social
ethical issues? impact of computer technology and the corresponding
a. Equity, Rights, Honesty, Exercise of formulation and justification of policies for its ethical
Company Power use?
b. Equality, Rights, Honesty, Exercise of
Corporate Power a. Technology Ethics
c. Equity, Rights, Honesty, Exercise of b. Business Ethics
Corporate Power c. Computer Ethics
d. Equity, Rights, Integrity, Exercise of d. Social Ethics
Corporate Power
5. These are passive techniques designed to reduce 3. The desire to be in full control of what and how much
the frequency of occurrence of undesirable information about themselves is available to others and
events. What are these? to whom it is available is an issue of __________.
a. Detective Controls
a. Privacy
b. Preventive Controls
b. Ownership
c. Physical Controls
c. equity access
d. Corrective Controls
d. insecurity
6. Which of the following is a benefit for misstate
of financial statements? 4. The following are the areas of ethical issues in
a. Diminished chances of promotion, or business, except:
endeavor firing or demotion.
b. Reduced stock price. a. rights
c. Delayed cash flow problems or b. equity
bankruptcy. c. exercise of corporate power
d. Declined incentive-based compensation. d. privilege
5. It is the theory and development of computer systems 11. Below are the broad objectives of internal control,
able to perform tasks that normally require human except:
intelligence, such as visual perception, speech
recognition, decision-making, and translation between a. To ensure accuracy and reliability of accounting
languages. records
b. To safeguard the assets
a. Technology c. To give the management full authority without
b. Computer Science complying with the prescribed policies
c. Artificial Intelligence d. To promote efficiency
d. Computer Ethics
12. It is the absence or weakness of a control.
6. Which of the following is not a principal type of
corruption? a. Defense
b. Exposure
a. Bribery c. Shield
b. Illegal Gratuities d. Risks
c. Conflicts of Interest
d. Asset Misappropriation 13. One of the three levels of internal control shield that
screens out aberrant events through forcing compliance
7. Which of the following is a reason why financial with prescribed or desired actions. This is the first line of
losses from fraud are difficult to quantify? defense in the control structure.

a. all fraud cases are detectable a. Preventive control

b. of that detected, not all is reported b. Detective control
c. complete information is gathered among such c. Corrective control
fraud cases d. Internal control
d. companies usually take civil or criminal action
against the perpetrators of fraud 14. It is a legislation that requires the management of
public companies to pursue and implement an adequate
8. It is a situation in which an individual has competing system of internal control over their financial reporting
interests or loyalties because of their duties to more than process.
one person or organization.
a. Universal Accounting Protocols
a. Bribery b. Conceptual Framework
b. Illegal Gratuities c. Sarbanes-Oxley
c. Conflict of Interest d. SAS 78/ COSO
d. Asset Misappropriation
15. It is the process by which the quality of internal
9. Which is not a special characteristic of management control design and operation can be assessed.
fraud?
a. Control Activities
a. perpetrated at levels of management b. Monitoring
b. uses financial statements c. Segregation of Duties
c. concealment of fraud d. Risk Assessment
d. misappropriation of assets

10. Which is not a form of asset misappropriation?

a. Payroll Fraud
b. Expense Reimbursements
c. Bribery
d. Non-Cash Misappropriations
CHAPTER 4 — THE REVENUE CYCLE
1. The revenue cycle consists of
TRUE/FALSE (True – Red) a. one subsystem–order entry
b. two subsystems–sales order processing and
1. The packing slip is also known as the shipping cash receipts
notice. c. two subsystems–order entry and inventory
2. The bill of lading is a legal contract between the control
buyer and the seller. d. three subsystems–sales order processing,
3. Another name for the stock release form is the credit authorization, and cash receipts
picking ticket. 2. The reconciliation that occurs in the shipping
4. Warehouse stock records are the formal accounting department is intended to ensure that
records for inventory. a. credit has been approved
5. The purpose of the invoice is to bill the customer. b. the customer is billed for the exact quantity
6. In most large organizations, the journal voucher file shipped
has replaced the formal general journal. c. the goods shipped match the goods ordered
7. The cash receipts journal is a special journal. d. inventory records are reduced for the goods
8. In the revenue cycle, the internal control “limit shipped
access” applies to physical assets only. 3. The adjustment to accounting records to reflect the
9. In real-time processing systems, routine credit decrease in inventory due to a sale occurs in the
authorizations are automated. a. warehouse
10. In a computerized accounting system, segregation of b. shipping department
functions refers to inventory control, accounts c. billing department
receivable, billing, and general ledger tasks. d. inventory control department
11. A written customer purchase order is required to 4. Which document triggers the revenue cycle?
trigger the sales order system. a. the sales order
12. Inventory control has physical custody of inventory. b. the customer purchase order
13. The principal source document in the sales order c. the sales invoice
system is the sales order. d. the journal voucher
14. Sales orders should be pre-numbered documents. 5. Copies of the sales order can be used for all of the
15. Integrated accounting systems automatically transfer following except
data between modules. a. purchase order
16. If a customer submits a written purchase order, there b. credit authorization
is no need to prepare a sales order. c. shipping notice
17. Sales return involves receiving, sales, credit, and d. packing slip
billing departments, but not accounts receivable. 6. The purpose of the sales invoice is to
18. A remittance advice is a form of turn-around a. record reduction of inventory
document. b. transfer goods from seller to shipper
19. A bill of lading is a request for payment for shipping c. bill the customer
charges. d. select items from inventory for shipment
20. In point of sale systems, authorization takes the form 7. The customer open order file is used to
of validation of credit card charges. a. respond to customer queries
b. fill the customer order
c. ship the customer order
d. authorize customer credit

8. The stock release copy of the sales order is not used

to
MULTIPLE CHOICES
 a. locate and pick the items from the b. the record keeping clerk maintains both
warehouse shelves accounts receivable and accounts payable
b. record any out-of-stock items subsidiary ledgers
c. authorize the warehouse clerk to release c. the warehouse clerk obtains a signature
custody of the inventory to shipping before releasing goods for shipment
d. record the reduction of inventory d. the accounts receivable clerk prepares
9. The shipping notice customer statements every month
a. is mailed to the customer 15. The most effective internal control procedure to
b. is a formal contract between the seller and prevent or detect the creation of fictitious credit
the shipping company memoranda for sales returns is to
c. is always prepared by the shipping clerk a. supervise the accounts receivable
d. informs the billing department of the department
quantities shipped b. limit access to credit memoranda
10. The billing department is not responsible for c. pre-number and sequence check all credit
a. updating the inventory subsidiary records memoranda
b. recording the sale in the sales journal d. require management approval for all credit
c. notifying accounts receivable of the sale memoranda
d. sending the invoice to the customer 16. The accounts receivable clerk destroys all invoices
11. Customers should be billed for backorders when for sales made to members of her family and does
a. the customer purchase order is received not record the sale in the accounts receivable
b. the backordered goods are shipped subsidiary ledger. Which procedure will not detect
c. the original goods are shipped this fraud?
d. customers are not billed for backorders a. pre-number and sequence check all invoices
because a backorder is a lost sale b. reconcile the accounts receivable control to
12. Usually specific authorization is required for all of the accounts receivable subsidiary ledger
the following except c. prepare monthly customer statements
a. sales on account which exceed the credit d. reconcile total sales on account to the debits
limit in the accounts receivable subsidiary ledger
b. sales of goods at the list price 17. Which department is least likely to be involved in
c. a cash refund for goods returned without a the revenue cycle?
receipt a. credit
d. write off of an uncollectible account b. accounts payable
receivable c. billing
13. Which of following functions should be segregated? d. shipping
a. opening the mail and making the journal 18. Which document is included with a shipment sent to
entry to record cash receipts a customer?
b. authorizing credit and determining reorder a. sales invoice
quantities b. stock release form
c. maintaining the subsidiary ledgers and c. packing slip
handling customer queries d. shipping notice
d. providing information on inventory levels 19. Good internal controls in the revenue cycle should
and reconciling the bank statement ensure all of the following except
a. all sales are profitable
b. all sales are recorded
c. credit is authorized
d. inventory to be shipped is not stolen
14. Which situation indicates a weak internal control 20. Which control does not help to ensure that accurate
structure? records are kept of customer accounts and
a. the mailroom clerk authorizes credit memos inventory?
 a. reconcile accounts receivable control to c. mail room
accounts receivable subsidiary d. cash receipts
b. authorize credit 27. EDI trading partner agreements specify all of the
c. segregate custody of inventory from record following except
keeping a. selling price
d. segregate record keeping duties of general b. quantities to be sold
ledger from accounts receivable c. payment terms
21. Internal controls for handling sales returns and d. person to authorize transactions
allowances do not include 28. A cash prelist is
a. computing bad debt expense using the a. a document that records sales returns and
percentage of credit sales allowances
b. verifying that the goods have been returned b. a document returned by customers with their
c. authorizing the credit memo by management payments
d. using the original sales invoice to prepare c. the source of information used to prepare
the sales returns slip monthly statements
22. The printer ran out of preprinted sales invoice forms d. none of the above
and several sales invoices were not printed. The best 29. An advantage of real-time processing of sales is
internal control to detect this error is a. the cash cycle is lengthened
a. a batch total of sales invoices to be prepared b. current inventory information is available
compared to the actual number of sales c. hard copy documents provide a permanent
invoices prepared record of the transaction
b. sequentially numbered sales invoices d. data entry errors are corrected at the end of
c. visual verification that all sales invoices each batch
were prepared 30. Commercial accounting systems have fully
d. none of the above will detect this error integrated modules. The word “integrated” means
23. Which department prepares the bill of lading? that
a. Sales a. segregation of duties is not possible
b. Warehouse b. transfer of information among modules
c. Shipping occurs automatically
d. Credit c. batch processing is not an option
24. A remittance advice is d. separate entries are made in the general
a. used to increase (debit) an account ledger accounts and the subsidiary ledgers
receivable by the cash received 31. The data processing method that can shorten the
b. is a turn-around document cash cycle is
c. is retained by the customer to show proof of a. batch, sequential file processing
payment b. batch, direct access file processing
d. none of the above c. real-time file processing
25. A weekly reconciliation of cash receipts would d. none of the above
include comparing
a. the cash prelist with bank deposit slips
b. the cash prelist with remittance advices
c. bank deposit slips with remittance advices
d. journal vouchers from accounts receivable
and general ledger
32. Which of the following is not a risk exposure in a
26. At which point is supervision most critical in the microcomputer accounting system?
cash receipts system? a. reliance on paper documentation is
a. accounts receivable increased
b. general ledger
 b. functions that are segregated in a manual a. Sales order procedures
environment may be combined in a b. Sales return procedures
microcomputer accounting system c. Cash receipts procedures
c. backup procedures require human d. Cash disbursement procedure
intervention 9. The three purposes of Bill of Lading according to
d. data are easily accessible Spelic (2016) are the following except:
33. Which journal is not used in the revenue cycle? a. It acts as evidence of contract between the
a. cash receipts journal shipper and the seller
b. sales journal b. It acts as evidence of a contract between the
c. purchases journal shipper and the carrier
d. general journal c. It serves as a receipt of freight services and
34. Periodically, the general ledger department receives goods
all of the following except d. It is a document of title, ownership, of goods
a. total increases to accounts receivable 10. Which one is not an advantage of real-time
b. total of all sales backorders processing?
c. total of all sales a. Less administrative errors.
d. total decreases in inventory b. Better inventory management.
35. The credit department c. Shortens Cash cycle.
a. prepares credit memos when goods are d. Reduces amount of expensive paper.
returned e. All are advantages.
b. approves credits to accounts receivable 11. This software is suitable for large organizations
when payments are received having various divisions.
c. authorizes the granting of credit to a. Ready-to-use software
customers b. Customized software
d. none of the above c. Tailored Software
36. Adjustments to accounts receivable for payments d. Large software
received from customers is based upon 12. PC systems generally provide inadequate control
a. the customer’s check over access to data files. This is a PC control issue
b. the cash prelist of ________.
c. the remittance advice that accompanies a. Segregation of Duties
payment b. Access Control
d. a memo prepared in the mailroom c. Accounting Records
37. The revenue cycle utilizes all of the following files d. File Backup
except 13. Essential documents in in reconciliation for cash
a. credit memo file receipts procedure are the following, EXCEPT:
b. sales history file a. Remittance advice
c. shipping report file b. Copy of prelist
d. cost data reference file c. Deposit slips
38. All of the following are advantages of real-time d. Journal vouchers
processing of sales except
a. The cash cycle is shortened
b. Paper work is reduced
c. Incorrect data entry is difficult to detect
d. Up-to-date information can provide a
competitive advantage in the marketplace 14. Shipping function: Stock release document &
GROUP 4 QUIZ: THE REVENUE CYCLE Packing Slip :
a. Reconciliation function: Journal vouchers &
8. Which of the following is not a process in the Return Slip
conceptual revenue cycle?
 b. General ledger: Accounts Receivable & b. False
Inventory Control
c. Billing function: Sales order & Shipping Group 4
notice 1. It is a form of turnaround document which contains
d. Billing function: Sales order & Stock release information needed to service individual customers’
15. This section of the sales order procedure is accounts.
important as it is the last opportunity to detect errors a. Check
before actually shipping the goods to the customer. b. Remittance Advice
a. Ship Goods c. Cash Prelist
b. Bill Customer d. Deposit Slip
c. Verify Order 2. Remittance advice shows the following information,
d. Check Credit except:
2 Purchase Returns Slip: Receiving department: a. Payment Date
a. Credit Memo: Billing Department b. Name of Customer
b. Sales order: Sales Department c. Amount Paid
c. Credit Memo: Sales Department d. Customer Check Number
d. Sales Order: Billing Department 3. It is a list that provides a means for verifying that
customer checks and remittance advices match in
PART II: TRUE OR FALSE amount.
a. Master List
8. Electronic Data Intersection (EDI) is the electronic b. Remittance List
interchange of business information using a c. Cash Prelims
standardized format; a process which allows one d. Billing Statement
company to send information to another company 4. The controller reconciles cash receipts of the
electronically rather than with paper. company using the following documents, except:
a. True a. Checks from the customer
b. False b. Copy of the prelist from the mail room
9. Asset custody must be separated from asset keeping. c. Deposit slips from the bank
a. True d. Related journal vouchers from the GL
b. False function
10. Reengineering involves using technology to improve 5. Within the revenue cycle, the assets to most likely to
efficiency and effectiveness of a task. protect are:
a. True a. Cash and Accounts Receivable
b. False b. Cash and Inventories
11. Automation involves radically rethinking the c. Prepaid Assets
business process and the workflow. d. Fixed Assets
a. True 6. It is the beginning of sales process.
b. False a. Pick goods
12. Reengineering involves replacing traditional b. Receive order
procedures with procedures that are innovative and c. Check credit
often very different from those that previously d. Ship goods
existed. 7. A customer’s order should be in a standard format.
a. True a. True
b. False b. False
8. Under what kind of investigation should new
13. At the end of the day, the cash receipts clerk customers undergo?
prepares a four-part deposit slip for the total amount a. Financial investigation
of the cash received. b. Comparative investigation
a. True c. Descriptive investigation
 d. Experimental investigation CHAPTER 5 — THE EXPENDITURE CYCLE
9. This should travel with the goods to describe its PART I
contents.
a. Shipping log TRUE/FALSE (True – Red)
b. Bill of lading
c. Shipping notice 1. Purchasing decisions are authorized by inventory
d. Packing slip control.
10. Which is not a step on sales return procedures 2. The blind copy of the purchase order that goes to the
a. Update sales journal receiving department contains no item descriptions.
b. Approve credit memo 3. Firms that wish to improve control over cash
c. Receive order disbursements use a voucher system.
d. Prepare return slip 4. In a voucher system, the sum of all unpaid vouchers
11. Which of the following are PC Control issues? in the voucher register equals the firm’s total
a. Access control voucher payable balance.
b. Segregation of duties 5. The accounts payable department reconciles the
c. Accounting records accounts payable subsidiary ledger to the control
d. All of the above account.
12. It refers to use technology to improve efficiency and 6. The use of inventory reorder points suggests the
effectiveness. need to obtain specific authorization.
a. Automation 7. Proper segregation of duties requires that the
b. Reengineering responsibility approving a payment be separated
c. Independent verification from posting to the cash disbursements journal.
d. Supervision 8. A major risk exposure in the expenditure cycle is
13. It is use technology to restructure business processes that accounts payable may be overstated at the end
and firm organization. of the accounting year.
a. Supervision 9. When a trading partner agreement is in place, the
b. Automation traditional three way match may be eliminated.
c. Reengineering 10. Authorization of purchases in a merchandising firm
d. Independent verification occurs in the inventory control department.
14. To counter the problem with regards to independent 11. A three way match involves a purchase order, a
verification, which could be done? purchase requisition, and an invoice.
a. Perform batch control balancing after each 12. Authorization for a cash disbursement occurs in the
run. cash disbursement department upon receipt of the
b. Produce management reports and summaries supplier’s invoice.
for end users to review. 13. An automated cash disbursements system can yield
c. Both a and b better cash management since payments are made on
d. None of these time.
15. Which is not an advantage of Real Time Processing? 14. Permitting warehouse staff to maintain the only
a. Shortens the cash cycle of the firm by inventory records violates separation of duties.
reducing the time between the order date 15. A purchasing system that employs electronic data
and billing date. interchange does not use a purchase order.
b. Better inventory management which can 16. Inventory control should be located in the
lead to a competitive advantage. warehouse.
c. More clerical errors, reducing incorrect 17. Inspection of shipments in the receiving department
items being shipped and bill discrepancies. would be improved if the documentation showed the
d. Reduces the amount of expensive paper value of the inventory.
documents and their storage costs. 18. One reason for authorizing purchases is to enable
efficient inventory management.
19. If accounts payable receives an invoice directly from 7. The reason that a blind copy of the purchase order is
the supplier it needs to be reconciled with the sent to receiving is to
purchase order and receiving report. a. inform receiving when a shipment is due
20. Supervision in receiving is intended to reduce the b. force a count of the items delivered
theft of assets. c. inform receiving of the type, quantity, and price
of items to be delivered
MULTIPLE CHOICES d. require that the goods delivered are inspected
8. The receiving report is used to
1. The purpose of the purchase requisition is to a. accompany physical inventories to the storeroom
a. order goods from vendors or warehouse
b. record receipt of goods from vendors b. advise the purchasing department of the dollar
c. authorize the purchasing department to order value of the goods delivered
goods c. advise general ledger of the accounting entry to
d. bill for goods delivered be made
2. The purpose of the receiving report is to d. advise the vendor that the goods arrived safely
a. order goods from vendors 9. When a copy of the receiving report arrives in the
b. record receipt of goods from vendors purchasing department, it is used to
c. authorize the purchasing department to order a. adjust perpetual inventory records
goods b. record the physical transfer of inventory from
d. bill for goods delivered receiving to the warehouse
3. All of the following departments have a copy of the c. analyze the receiving department’s process
purchase order except d. recognize the purchase order as closed
a. the purchasing department 10. The financial value of a purchase is determined by
b. the receiving department reviewing the
c. accounts payable a. packing slip
d. general ledger b. purchase requisition
4. The purpose of the purchase order is to c. receiving report
a. order goods from vendors d. supplier’s invoice
b. record receipt of goods from vendors 11. Which document is least important in determining
c. authorize the purchasing department to order the financial value of a purchase?
goods a. purchase requisition
d. approve payment for goods received b. purchase order
5. The open purchase order file in the purchasing c. receiving report
department is used to determine d. supplier’s invoice
a. the quality of items a vendor ships 12. In a merchandising firm, authorization for the
b. the best vendor for a specific item payment of inventory is the responsibility of
c. the orders that have not been received a. inventory control
d. the quantity of items received b. purchasing
6. The purchase order c. accounts payable
a. is the source document to make an entry into the d. cash disbursements
accounting records 13. In a merchandising firm, authorization for the
b. indicates item description, quantity, and price purchase of inventory is the responsibility of
c. is prepared by the inventory control department a. inventory control
d. is approved by the end-user department b. purchasing
c. accounts payable
d. cash disbursements
14. When purchasing inventory, which document usually 20. To maintain a good credit rating and to optimize
triggers the recording of a liability? cash management, cash disbursements should arrive at
a. purchase requisition the vendor’s place of business
b. purchase order a. as soon as possible
c. receiving report b. on the due date
d. supplier’s invoice c. on the discount date
15. Because of time delays between receiving inventory d. by the end of the month
and making the journal entry 21. The cash disbursement clerk performs all of the
a. liabilities are usually understated following tasks except
b. liabilities are usually overstated a. reviews the supporting documents for
c. liabilities are usually correctly stated completeness and accuracy
d. none of the above b. prepares checks
16. Usually the open voucher payable file is organized c. signs checks
by d. marks the supporting documents paid
a. vendor 22. When a cash disbursement in payment of an
b. payment due date accounts payable is recorded
c. purchase order number a. the liability account is increased
d. transaction date b. the income statement is changed
17. Which of the following statements is not correct? c. the cash account is unchanged
a. the voucher system is used to improve control d. the liability account is decreased
over cash disbursements 23. Authorization for payment of an accounts payable
b. the sum of the paid vouchers represents the liability is the responsibility of
voucher payable liability of the firm a. inventory control
c. the voucher system permits the firm to b. purchasing
consolidate payments of several invoices on one c. accounts payable
voucher d. cash disbursements
d. many firms replace accounts payable with a 24. Of the following duties, it is most important to
voucher payable system separate
18. In the expenditure cycle, general ledger does not a. warehouse from stores
a. post the journal voucher from the accounts b. warehouse from inventory control
payable department c. accounts payable and accounts receivable
b. post the account summary from inventory d. purchasing and accounts receivable
control 25. In a firm with proper segregation of duties, adequate
c. post the journal voucher from the purchasing supervision is most critical in
department a. purchasing
d. reconcile the inventory control account with the b. receiving
inventory subsidiary summary c. accounts payable
19. The documents in a voucher packet include all of the d. general ledger
following except 26. The receiving department is not responsible to
a. a check a. inspect shipments received
b. a purchase order b. count items received from vendors
c. a receiving report c. order goods from vendors
d. a supplier’s invoice d. safeguard goods until they are transferred to the
warehouse
27. The major risk exposures associated with the 32. In a real-time processing system with a high number
receiving department include all of the following except of transactions, the best and most practical control over
a. goods are accepted without a physical count cash disbursements is to have
b. there is no inspection for goods damaged in a. all checks manually signed by the treasurer
shipment b. all checks signed by check-signing equipment
c. inventories are not secured on the receiving c. checks over a certain dollar amount manually
dock signed by the treasurer
d. the audit trail is destroyed d. checks over a certain dollar amount manually
28. When searching for unrecorded liabilities at the end signed by the cash disbursements clerk
of an accounting period, the accountant would search all 33. The document which will close the open purchase
of the files except requisition file is the
a. the purchase requisition file a. purchase order
b. the cash receipts file b. vendor invoice
c. the purchase order file c. receiving report
d. the receiving report file d. one of the above
29. In regards to the accounts payable department, which 34. Goods received are inspected and counted to
statement is not true? a. determine that the goods are in good condition
a. the purchase requisition shows that the b. determine the quantity of goods received
transaction was authorized c. preclude payment for goods not received or
b. the purchase order proves that the purchase received in poor condition
was required d. all of the above
c. the receiving report provides evidence of the 35. If a company uses a standard cost system, inventory
physical receipt of the goods records can be updated from the
d. the supplier’s invoice indicates the financial a. vendor invoice
value of the transaction b. purchase order
30. In a computerized system that uses an economic c. receiving report
order quantity (EOQ) model and the perpetual inventory d. purchase requisition
method, who determines when to reorder inventory? 36. If a company uses an actual cost system, inventory
a. the inventory control clerk records can first be updated from the
b. the purchasing department a. vendor invoice
c. the vendor b. purchase order
d. the computer system c. receiving report
31. Firms can expect that proper use of a valid vendor d. purchase requisition
file will result in all of the following benefits except 37. Copies of a purchase order are sent to all of the
a. purchasing agents will be discouraged from following except
improperly ordering inventory from related a. inventory control
parties b. receiving
b. purchases from fictitious vendors will be c. general ledger
detected d. accounts payable
c. the most competitive price will be obtained 38. The receiving report
d. the risk of purchasing agents receiving a. is used to update the actual cost inventory ledger
kickbacks and bribes will be reduced b. accompanies the goods to the storeroom
c. is sent to general ledger
d. is returned to the vendor to acknowledge receipt
of the goods
39. A supplier invoice 18. In this department a multipart purchase order is
a. is included with the goods prepared to be sent to the vendor, AP, receiving,
b. shows what was ordered even if all was not data processing, and purchasing department file.
shipped a. Data Processing Department
c. is sent by vendor to accounts payable b. Receiving Department
d. none of the above c. Purchasing Departmen
40. The cash disbursement function is d. Accounts Payable Department
a. part of accounts payable 19. After receiving the purchase order in data processing
b. an independent accounting function department, an open purchase order file will be
c. a treasury function created and the open purchase requisition file will be
d. part of the general ledger department transferred to close purchase requisition file.
a. True
GROUP 5 QUIZ: THE EXPENDITURE CYCLE PART b. False
I 16. This file contains purchase requisition number,
inventory number, quantity on order, vendor
13. It contributes to both control and efficiency by number, and the unit standard cost.
listing only those vendors approved to do business a. Open and Close Requisition File
with the organization. b. Inventory Master Fil
a. Voucher System c. Vendor File
b. Valid Vendor File d. Open and Purchase Order File
c. Blind Copy of the Purchase Order 17. It processes the payment of obligations created in
d. Receiving Report the purchases system.
14. These procedures include the tasks involved in a. Cash Disbursement System
identifying inventory needs, placing the order, b. Cash Receipt System
receiving the inventory and recognizing the liability. c. Purchases Procedure
a. Cash Disbursement System d. Sales Reporting
b. Sales Forecasting 18. This function continually monitors inventory levels.
c. Financial Reporting As inventory levels drop to their predetermined
d. Purchases Processing Procedures reorder points, it formally authorizes replenishment
15. Which document helps to ensure that the receiving with a purchase requisition.
clerks actually count the number of goods received? a. Inventory Control
a. Packing List b. Purchase Orders
b. Blind Copy of Purchase Order c. Purchases Subsystem
c. Shipping Notice d. Supervision
d. Invoice 19. The reengineered system addresses many of the
16. The reconciliation of this document with the PO operational weaknesses associated with the
signifies that the organization has a legitimate automated system except:
obligation. a. It uses real-time procedures and direct access
a. Invoices files to shorten the lag time in record keeping
b. Purchase Orders b. It eliminates routine clerical procedures by
c. Purchase Requisitions distributing terminals to user areas
d. Receiving Reports c. This system removes the physical separation
17. This document should reconcile with the purchase between authorization and transaction
requisition. processing
a. Invoices d. It achieves a significant reduction in paper
b. Purchase Orders documents by using digital communications
c. Checks between departments and by digitally storing
d. Receiving Reports records.
20. The automated system of expenditure cycle a.order goods from vendors
promotes effective cash management by scanning b.record receipt of goods from vendors
the voucher file daily for items due, thus avoiding c.authorize the purchasing department to order
early payments and missed due dates. goods
a. True d. approve payment for goods received
b. False 5. The open purchase order file in the purchasing
21. The blind copy contains no __________________ department is used to determine
information about the products being received. a. the quality of items a vendor ships
a. Quantity or Price b. the best vendor for a specific item
b. Quantity and Price c. the orders that have not been received
c. Price or PO Number d. the quantity of items received
d. Price and Terms 6. The purchase order
22. Upon recording the liability, the AP clerk transfers a. is the source document to make an entry into
all source documents to the open AP file. These the accounting records
source documents include the following except: b. indicates item description, quantity, and
a. Purchase Order price
b. Receiving Report c. is prepared by the inventory control
c. Disbursement Voucher department
d. Invoice d. is approved by the end-user department
23. This states that there must be a control of access to
physical assets. Controls might include locks, 7. The reason that a blind copy of the purchase order is
alarms, and restricted access to areas that contain sent to receiving is to
inventories and cash. a. inform receiving when a shipment is due
a. Theft of Assets b. force a count of the items delivered
b. Indirect Access c. inform receiving of the type, quantity, and
c. Direct Access price of items to be delivered
d. Supervision d. require that the goods delivered are
inspected
Group 5 8. The receiving report is used to
1. This should travel with the goods to describe its a. accompany physical inventories to the
contents. storeroom or warehouse
a. order goods from vendors b. advise the purchasing department of the
b. record receipt of goods from vendors dollar value of the goods delivered
c. authorize the purchasing department to order c. advise general ledger of the accounting entry
goods to be made
d. bill for goods delivered d. advise the vendor that the goods arrived
2. The purpose of the receiving report is to safely
a. order goods from vendors 9. When a copy of the receiving report arrives in the
b. record receipt of goods from vendors purchasing department, it is used to
c. authorize the purchasing department to order a. accompany physical inventories to the
goods storeroom or warehouse
d. bill for goods delivered b. advise the purchasing department of the
3. All of the following departments have a copy of the dollar value of the goods delivered
purchase order except c. advise general ledger of the accounting entry
a. order goods from vendors to be made
b. the receiving department d. recognize the purchase order as closed
c. accounts payable 10. The financial value of a purchase is determined by
d. general ledger reviewing the
4. The purpose of the purchase order is to a. Packing slip
 b. purchase requisition CHAPTER 6 — THE EXPENDITURE CYCLE
c. receiving report PART II
d. supplier’s invoice
11. Which document is least important in determining
the financial value of a purchase? TRUE/FALSE (True – Red)
a. purchase requisition
b. purchase order 1. Time cards are used by cost accounting to allocate
c. receiving report direct labor charges to work in process.
d. supplier’s invoice 2. The personnel department authorizes changes in
12. In a merchandising firm, authorization for the employee pay rates.
payment of inventory is the responsibility of 3. Most payroll systems for mid-size firms use real-
a. inventory control time data processing.
b. purchasing 4. To improve internal control, paychecks should be
c. accounts payable distributed by the employee's supervisor.
d. cash disbursements 5. Employee paychecks should be drawn against a
13. Because of time delays between receiving inventory special checking account.
and making the journal entry 6. Because a time clock is used, no supervision is
a. liabilities are usually understated required when employees enter and leave the work
b. liabilities are usually overstated place.
c. liabilities are usually correctly stated
7. Inventory control performs the formal record
keeping function for fixed assets.
d. none of the above
8. The depreciation schedule shows when assets are
14. Which of the following statements is not correct?
fully depreciated.
a. the voucher system is used to improve
9. Authorization to dispose of fixed assets should be
control over cash disbursements
issued by the user of the asset.
b. the sum of the paid vouchers represents the
10. Work-in-process records are updated by payroll
voucher payable liability of the firm
personnel.
c. the voucher system permits the firm to
11. Ideally, payroll checks are written on a special bank
consolidate payments of several invoices on
account used only for payroll.
one voucher
12. The supervisor is the best person to determine the
d. many firms replace accounts payable with a
existence of a “phantom employee” and should
voucher payable systems
distribute paychecks.
15. When a cash disbursement in payment of an
13. Payroll processing can be automated easily because
accounts payable is recorded
accounting for payroll is very simple.
a. the liability account is increased
14. Timekeeping is part of the personnel function.
b. the income statement is changed
15. Fixed asset accounting systems include cost
c. the cash account is unchanged
allocation and matching procedures that are not part
d. the liability account is decreased
of routine expenditure systems.
16. Asset maintenance involves only the recording of
depreciation charges. Physical improvements are
always expensed.
17. Fixed Asset Systems must keep track of the physical
location of each asset to promote accountability.
18. Time cards capture the total time an individual
worker spends on each production job.
19. Accounting conventions and IRS rules sometime
specify the depreciation parameters to be used.
20. The fixed asset disposal report authorizes the user
department to dispose of a fixed asset.
MULTIPLE CHOICES a. the economic benefit of purchasing the asset
b. the cost of the asset
1. The document that captures the total amount of time c. the depreciation method being used
that individual workers spend on each production d. the location of the asset
job is called a 7. Which control is not a part of the Fixed Asset System?
a. time card a. formal analysis of the purchase request
b. job ticket b. review of the assumptions used in the capital
c. personnel action form budgeting model
d. labor distribution form c. development of an economic order quantity
2. An important reconciliation in the payroll system is model
a. general ledger compares the labor distribution d. estimates of anticipated cost savings
summary from cost accounting to the 8. Objectives of the Fixed Asset System do not include
disbursement voucher from accounts payable a. authorizing the acquisition of fixed assets
b. personnel compares the number of employees b. recording depreciation expense
authorized to receive a paycheck to the c. computing gain and/or loss on disposal of fixed
number of paychecks prepared assets
c. production compares the number of hours reported d. maintaining a record of the fair market value of
on job tickets to the number of hours all fixed assets
reported on time cards 9. Which of the following is not a characteristic of the
d. payroll compares the labor distribution summary to Fixed Asset System?
the hours reported on time cards a. Acquisitions are routine transactions requiring
3. Which internal control is not an important part of the general authorization.
payroll system? b. Retirements are reported on an authorized
a. Supervisors verify the accuracy of employee time disposal report form.
cards. c. Acquisition cost is allocated over the expected
b. Paychecks are distributed by an independent life of the asset.
paymaster. d. Transfer of fixed assets among departments is
c. Accounts payable verifies the accuracy of the recorded in the fixed asset subsidiary ledger.
payroll register before transferring payroll 10. In the payroll subsystem, which function should
funds to the general checking accounting. distribute paychecks?
d. General ledger reconciles the labor distribution a. personnel
summary and the payroll disbursement b. timekeeping
voucher. c. paymaster
4. Which transaction is not processed in the Fixed Asset d. payroll
System? 11. Where does the responsibility lie for reconciling the
a. purchase of building labor distribution summary and the payroll
b. improvement of equipment disbursement voucher?
c. purchase of raw materials a. cash disbursements
d. sale of company van b. cost accounting
5. Depreciation c. personnel
a. is calculated by the department that uses the fixed d. general ledger
asset 12. Which of the following statements is not true?
b. allocates the cost of the asset over its useful life a. Routine payroll processing begins with the
c. is recorded weekly submission of time cards.
d. results in book value approximating fair market b. Payroll clerks must verify the hours reported on
value the time cards.
c. Payroll reconciles personnel action forms with
time cards and prepares paychecks.
6. Depreciation records include all of the following d. Cash disbursements signs paychecks and
information about fixed assets except forwards them to the paymaster for distribution.
13. In a manufacturing firm, employees use time cards c. Fully depreciated assets are immediately
and job tickets. Which of the following statements disposed of.
is not correct? d. Depreciation policies are in writing.
a. Job tickets are prepared by employees for each 18. Cost accounting updates work-in-process accounts
job worked on, so an employee may have from
more that one job ticket on a given day. a. time cards
b. An individual employee will have only one b. the labor distribution summary
time card. c. job tickets
c. The time reported on job tickets should d. personnel action forms
reconcile with the time reported on time cards. 19. Payroll uses time card data to do all of the following
d. Paychecks should be prepared from the job except
tickets. a. prepare the payroll register
14. Which department is responsible for approving b. update employee payroll records
changes in pay rates for employees? c. prepare the labor distribution summary
a. payroll d. prepare paychecks
b. treasurer 20. Payroll checks are typically drawn on
c. personnel a. the regular checking account
d. cash disbursements b. a payroll imprest account
15. Which of the following situations represents a c. a wages payable account
serious control weakness? d. petty cash
a. Timekeeping is independent of the payroll 21. The personnel action form provides authorization
department. control by
b. Paychecks are distributed by the employees a. preventing paychecks for terminated employees
immediate supervisor. b. verifying pay rates for employees
c. Time cards are reconciled with job tickets. c. informing payroll of new hires
d. Personnel is responsible for updating employee d. all of the above
records, including creation of records for 22. Accounting records that provide the audit trail for
new hires. payroll include all of the following except
16. Why would an organization require the paymaster to a. time cards
deliver all unclaimed paychecks to the internal b. job tickets
audit department? c. payroll register
a. to detect a “phantom employee” for whom a d. accounts payable register
check was produced 23. Personnel actions forms are used to do all of the
b. to prevent an absent employee’s check from following except
being lost a. activate new employees
c. to avoid paying absent employees for payday b. terminate employees
d. to prevent the paymaster from cashing c. record hours worked
unclaimed checks d. change pay rates
24. The payroll department performs all of the following
except
a. prepares the payroll register
b. distributes paychecks
c. updates employee payroll records
d. prepares paychecks
17. Which of the following is not a reasonable control 25. The document that records the total amount of time
for fixed assets? spent on a production job is the
a. Proper authorization is required for acquisition a. time card
and disposal of fixed assets. b. job ticket
b. Fixed asset records show the location of each c. labor distribution summary
asset. d. personnel action form
26. A control technique that can reduce the risk of a a. the recording of periodic depreciation
terminated employee being paid is b. adjusting the asset records to reflect the cost of
a. a security camera viewing the time clock physical improvements
b. the supervisor taking role during the shift c. keeping track of the physical location of the
c. paychecks being distributed by an independent assets
paymaster d. all of the above
d. reconciliation of time cards and job tickets 34. The Fixed Asset Systems does all of the following
27. Accounts payable except
a. signs paychecks a. records acquisition of assets
b. prepares the payroll voucher b. records improvements to assets
c. reconciles time cards and employee records c. estimates the fair market value of assets in
d. distributes paychecks to employees service
28. All of the following are processed by the Fixed Asset d. records the disposal of assets
System except 35. Asset disposal
a. sale of unneeded equipment a. occurs as soon as an asset is fully depreciated
b. purchase of raw materials b. requires no special authorization
c. repair of production equipment c. automatically initiates the purchase of a
d. purchase of a new plant replacement asset
29. The Fixed Asset System performs all of the d. must follow formal authorization procedures
following except
a. determines the need for new assets GROUP 6 QUIZ: THE EXPENDITURE CYCLE PART
b. maintains depreciation records II
c. records retirement and disposal of assets
d. tracks the physical location of fixed assets PART I: MULTIPLE CHOICE
30. The payroll department performs all of the following
except 1. It captures the time that individual workers spend on
a. prepares paychecks each production job.
b. transfers adequate funds to the payroll imprest a. Personnel Action Form
account b. Job Tickets
c. updates employee payroll records c. Time Cards
d. prepares the payroll register d. Payroll Record
31. Depreciation 2. It captures the time the employee is at work.
a. assures that assets are reported at fair market a. Personnel Action Form
value b. Job Tickets
b. is discretionary for many firms c. Time Cards
c. allocates the cost of an asset over its useful life d. Payroll Record
d. is the responsibility of the department using the 3. Its function is to prepare a single check for the entire
asset amount of the payroll and deposits it in the payroll
imprest account.
a. Cash Disbursement Department
b. Cost Accounting Department
c. Accounts Payable Department
32. The Fixed Asset System is similar to the expenditure
cycle except
d. Production Department
a. fixed asset transactions are non-routine and
require special authorization and controls
4. The department that prepares copies of cash
b. fixed assets are capitalized, not expensed
disbursement voucher is.
c. both a and b
a. Cash Disbursement Department
d. none of the above
b. Cost Accounting Department
33. Asset maintenance involves
c. Accounts Payable Department
d. Production Department c. Authorizes the fixed asset department to
5. The following are examples of payroll control remove from the ledger an asset disposed of
except: by the user department
a. Access Control d. Reviewing and verifying the accuracy and
b. Segregation of Duty completeness of the depreciation charges
c. Dependent Verification calculated by the fixed asset system
d. Supervision
6. The following are the objectives of fixed asset PART II: TRUE OR FALSE
system except:
a. Maintain adequate accounting records of 9. Unlike any other transactions, the asset disposal does
asset acquisition, cost, description, and not require an approval.
physical location in the organization a. True
b. Maintain accurate depreciation records for b. False
depreciable assets in accordance with 10. The fixed asset disposal procedure begins when the
acceptable methods fixed asset accounting clerk receives a receiving report
c. It is involved in the process of asset and a cash disbursement voucher.
acquisition, asset maintenance a. True
d. Provide management with information to b. False
help plan for future fixed asset investments 11. Gusto is standalone payroll software built for the
7. Which of the following statements is true? small business owner.
a. In the task of acquiring the asset, the a. True
receiving department delivers the acquired b. False
asset to the central store or to the warehouse. 12. Manual payroll system is less costly than the
b. Conceptual-based fixed asset system automated one.
demonstrates real time processing a. True
c. In fixed asset acquisition, the fixed asset b. False
department performs the record keeping 13. Dedicated payroll management covers core tasks like
function payroll processing, income tax calculations, and pay
d. Fixed asset system processes routine check printing.
transactions a. True
b. False
14. Integrated payroll management are standalone apps
that go beyond core features with specialized functions
as time-tracking and attendance, customized reporting,
benefits administration, and even a tax planner.
a. True
b. False

15. BambooHR could be an alternative for Xero.

8. This file contains purchase requisition number, a. True
inventory number, quantity on order, vendor b. False
number, and the unit standard cost.
a. Review the asset acquisition and approval Group 6
procedures to determine the reasonableness 1. It is a record prepared by the production
of factors used in the analysis employees to account for the time that
b. Verify the location, condition, and fair value individual workers spend on each production
of the organization’s fixed assets against the job.
fixed asset records in the subsidiary ledger a. Time record
 b. Job ticket including employee benefits, labor resource
c. Time card planning, employee relations, employee skills,
d. Job record and personnel actions (pay rates, deductions, and
2. Which of the following is not a use of personnel so on), as well as payroll.
action forms? a. Human Resource Management (HRM)
a. To eliminate employees system
b. To change the pay rate of employees b. Personnel
c. To account for the total time worked c. Cost Accounting
each pay period for payroll calculation d. Time-Keeping
d. To activate new employees 9. The fixed asset system uses the depreciation
3. Which department prepares a cash schedules to record end-of-period depreciation
disbursements voucher for the total amount of transactions automatically. The specific tasks
the payroll? includes which of the following
a. Payroll department a. Calculating the current period’s
b. Accounts payable department depreciation,
c. Cash disbursements department b. Updating the accumulated depreciation
d. Production department and book value fields in the subsidiary
4. The audit trail for payroll includes the following records,
documents, except: c. Posting the total amount of depreciation
a. Personnel action forms to the affected general ledger accounts
b. General ledger accounts (depreciation expense and accumulated
c. Time cards, job tickets, and depreciation), and
disbursement vouchers d. Recording the depreciation transaction
d. Subsidiary ledger accounts by adding a record to the journal
5. The _____________ department makes changes voucher file
to the employee file in real time via terminals. e. All of the above
These changes include additions of new 10. The _________ formally authorizes the fixed
employees, deletions of terminated employees, asset department to remove from the ledger an
changes in dependents, changes in withholding, asset disposed of by the user department.
and changes in job status (pay rate) a. Disposal report
a. Human Resource Management (HRM) b. Assessment Report
system c. Information Report
b. Personnel d. Acquisition Report
c. Cost Accounting 11. Controlling the fixed asset system includes
d. Time-Keeping which of the following
6. The ______________ department enters job cost a. Authorization Controls
data (real time or daily) to create the labor usage b. Supervision Controls
file. c. Independent Verification Controls
a. Human Resource Management (HRM) d. All of the above
system 12. These are relatively permanent items that often
b. Personnel collectively represent the largest financial
c. Cost Accounting investment by the organization.
d. Time-Keeping a. Intangible assets
7. Upon receipt of the approved time cards from b. Fixed assets
the supervisor at the end of the week, the c. Current assets
_____________ department creates the current d. Biological assets
attendance file 13. This usually begins with the departmental
a. Human Resource Management (HRM) manager (user) recognizing the need to obtain a
system new asset or replace an existing one.
b. Personnel a. Asset requisition
c. Cost Accounting b. Asset disposal
d. Time-Keeping c. Asset management
8. For moderate-sized and large organizations, d. Asset acquisition
payroll processing is often integrated within the 14. This process involves adjusting the fixed asset
_________________________. It captures and subsidiary balances as the assets (excluding
processes a wide range of personnel related data, land) depreciate over time or with usage.
 a. Asset maintenance 3. The cost accounting system authorizes the release of
b. Asset acquisition raw materials into production.
c. Asset management 4. Batch processing creates a homogeneous product
d. Asset disposal
through a continuous series of standard procedures.
15. It begins when the responsible manager issues a
request to dispose of the asset 5. The bill of materials specifies the types and
a. Asset acquisition quantities of the raw materials and subassemblies
b. Asset inventory used in producing a single unit of finished product.
c. Asset disposal 6. A purchase requisition authorizes the storekeeper to
d. Asset maintenance release materials to individuals or work centers in
the production process.
7. The SAP R/3 system organizes business processes
into four categories: financial, logistics, human
resources, and business process support.
8. The objective of the Economic Order Quantity
model is to reduce total inventory costs by
minimizing carrying costs and ordering costs.
9. The work-in-process file is the subsidiary ledger for
the work-in-process control account.
10. Move tickets authorize the storekeeper to release
materials to work centers.
11. An operating characteristic of modern
manufacturing firms is that labor is replaced with
capital so that the firm can be more efficient and
therefore more competitive.
12. Computer Integrated Manufacturing focuses on
reducing the complexity of the physical
manufacturing layout of the shop floor.
13. The only objective of the Just-In-Time philosophy is
to reduce inventory levels.
14. Accounting in a world-class manufacturing
environment emphasizes standard cost and variance
analysis.
15. Identifying cost drivers is an essential step in
implementing the Just-In-Time philosophy.
16. A world class information system produces very
little paper.
17. Internal control procedures are virtually identical in
a world-class manufacturing environment and in a
traditional manufacturing environment.
18. In a world-class company, all activities, from
acquisition of raw materials to selling the final
CHAPTER 7 — THE CONVERSION CYCLE
product, form a “chain of customers.”
19. The two subsystems of a traditional conversion cycle
are the production system and the delivery system.
TRUE/FALSE (True – Red) 20. Manufacturing resources planning (MRP II) has
evolved into electronic resource planning (ERP).
1. The philosophy of customer satisfaction permeates
the world-class firm. MULTIPLE CHOICES
2. Reports generated by the cost accounting system
include performance reports and budget reports.
1. Which item does not describe a world-class company? b. raw material inventory levels
a. the goal of a world-class company is to delight its c. the standard cost of the item
customers d. the sales forecast
b. customers in a world-class company are external 8. The production schedule is
departments only a. the expected demand for the firm’s finished
c. world-class companies work in cross-functional goods for a given year
teams b. the formal plan and authority to begin production
d. a world-class company has a flat organizational c. a description of the type and quantity of raw
structure materials and subassemblies used to produce a
2. Which subsystem is not a part of the production single unit of finished product
system? d. the sequence of operations during manufacturing
a. directing the movement of work through the 9. A move ticket
process a. is the formal plan and authority to begin
b. determining raw material requirements production
c. authorizing work to be performed b. specifies the materials and production required
d. monitoring the flow of cost information related to for each batch
production c. records the work done in each work center
3. The purpose of the cost accounting system is to d. authorizes the storekeeper to release materials to
a. produce information for inventory valuation work centers
b. authorize release of raw materials 10. The internal control significance of the excess
c. direct the movement of work-in-process materials requisition is that it
d. determine material requirements a. indicates the amount of material released to work
4. Which process creates a homogeneous product centers
through a continuous series of standard procedures? b. identifies materials used in production that
a. batch process exceed the standard amount allowed
b. make-to-order process c. indicates the standard quantities required for
c. continuous process production
d. none of the above d. documents the return to raw materials inventory
5. An example of a continuous process is the production of unused production materials
of 11. Inventory control performs all of the following tasks
a. wedding invitations except it
b. milk products a. provides production planning and control with
c. jet aircraft the inventory status report of finished goods
d. all of the above b. updates the raw material inventory records
c. prepares a materials requisition for each
production batch
d. records the completed production as an increase
to finished goods inventory
6. All of the following are characteristics of batch 12. The storekeeper releases raw materials based on the
processing except a. production schedule
a. each item in the batch is similar b. materials requisition
b. batches are produced in accordance with detailed c. work order
customer specifications d. bill of materials
c. batches are produced to replenish depleted 13. Which of the following is not an assumption of the
inventory levels Economic Order Quantity model?
d. setting up and retooling is required for different a. demand for the product is known with certainty
batches b. total cost per year of placing orders is fixed
7. When determining which items to produce, a firm c. lead time is known and is constant
must know d. there are no quantity discounts
a. last year’s production level 14. Firms hold safety stock to compensate for
 a. mathematical weaknesses of the Economic Order b. business process support
Quantity model c. strategic
b. variations in lead time or daily demand d. financial
c. fluctuations in carrying costs 21. Which situation violates the segregation of functions
d. uncertainty in the estimation of ordering costs control procedure?
15. What is the economic order quantity if the annual a. production planning and control is located apart
demand is 10,000 units, set up cost of placing each from the work centers
order is $3 and the holding cost per unit per year is $2? b. inventory control maintains custody of
a. 174 inventory items
b. 123 c. cost accounting has custody of and makes
c. 245 entries on cost records
d. none of the above d. work centers record direct labor on job tickets
16. If the daily demand is 40 units and the lead time is 22. All of the following are internal control procedures
12 days, the reorder point is that should be in place in the conversion cycle
a. 52 units except
b. 48 units a. calculation and analysis of direct material and
c. 480 units direct labor variances
d. none of the above b. retention of excess materials by work centers
17. Which statement is not correct? c. physical count of inventory items on hand
a. general ledger creates a new cost record upon d. limited access to raw material and finished
receipt of a work order from production goods inventories
planning and control 23. Process simplification focuses on
b. cost accounting updates the cost record with data a. using Computer Numerical Controlled
gathered from the materials requisition machines which stand alone within a
c. general ledger posts summary information about traditional
the manufacturing process based on a setting
journal voucher prepared by cost accounting b. completely automating the manufacturing
d. cost accounting computes variances and applies environment
overhead to individual cost records c. reducing the complexity of the physical
manufacturing layout of the shop floor
d. organizing the process into functional
departments
24. A manufacturing process that is organized into group
technology cells utilizing no human labor is
18. Which of the following is not a category of critical called
success factors in most manufacturing companies? a. islands of technology
a. product quality b. process simplification
b. customer service c. Computer Integrated Manufacturing
c. revenue generation d. traditional manufacturing
d. resource management 25. An example of automation of manufacturing design
19. Computer integrated manufacturing groups all of the is
following technologies except a. Computer Aided Engineering
a. robotics b. Automated Storage and Retrieval Systems
b. materials requirements planning c. Computer Numerical Control
c. automated storage and retrieval systems d. robotics
d. computer aided design 26. An example of automation of manufacturing
20. The SAP R/3 system provides pre-defined modules planning is
to support business processes in the all of the a. Computer Aided Engineering
following categories except b. Automated Storage and Retrieval Systems
a. human resources c. Materials Requirements Planning
 d. Computer Numerical Control d. the financial nature of the reports permits
27. Firms implement a Just-In-Time inventory approach comparisons to be made among different
to types of products
a. reduce investment in inventories 34. In traditional firms, information reporting
b. determine the optimum inventory level using a. provides financially oriented information
the EOQ model relating to operations
c. camouflage production problems b. presents detailed information about activities
d. ensure overproduction of inventory c. shows the allocation of costs first to activities
28. Characteristics of Just-In-Time manufacturing and then to cost objects
include all of the following except d. identifies nonessential activities
a. push manufacturing 35. Types of information provided by Activity Based
b. zero defects Costing include
c. reduced setup time and small lot sizes a. a description of the single activity driver used
d. reliable vendors for overhead application
29. The cost of poor quality includes all of the following b. the dollar value of the direct material usage
except variance
a. cost of rework c. identification of cost drivers
b. warranty claims d. details of the components of the single
c. scheduling delays overhead cost pool
d. proceeds from the sale of scrap 36. Which statement is not correct?
30. A flexible manufacturing system a. the benchmark approach compares key
a. creates bottlenecks in the process activities with similar activities in other firms
b. leads to an “us” versus “them” attitude among b. critical success factors include product and
workers process quality
c. shortens the physical distance between activities c. the ABC model includes two perspectives: an
d. is organized along functional lines allocation of cost perspective and a process
perspective
d. in world-class manufacturing firms, quality
control activities at the end of the process are
essential
31. Deficiencies of the traditional cost accounting 37. All of the following are documents in batch process
information system include all of the following except production systems except
a. an emphasis on financial performance a. production schedule
b. inaccurate cost allocations b. route sheet
c. an emphasis on standard costs c. materials requisition
d. immediate feedback about deviations from the d. purchase order
norm 38. Transaction authorization occurs in a traditional
32. Which statement is not correct? manufacturing environment in all of the following
a. an activity driver is a means to measure the ways except
activity used by the cost object a. production planning and control initiates
b. cost object describes the work performed in a production with a work order
firm b. movement of the work through the production
c. activities cause costs process follows the move ticket
d. cost objects create a demand for activities c. the sales department modifies work orders to
33. Firms are adopting Activity Based Costing (ABC) match changes in demand
because d. the materials requisition authorizes the
a. it facilitates the analysis of variances storekeeper to release materials to the work
b. it more accurately allocates costs to products centers
c. it recognizes the importance of direct labor as 39. Manufacturing flexibility incorporates four
a component of total manufacturing cost characteristics. These include all of the following except
 a. high product quality b. Physical Security
b. high inventory levels c. Technical Security
c. automation of manufacturing processes d. Corporate Security
d. physical reorganization of production facilities 6. Wonwoo Company has an annual demand of 183,750
40. The stages of the automation continuum are (in units, a per-unit order cost of ₱240, and a carrying cost
order) per unit of ₱5. Using these values, calculate the EOQ.
a. traditional, computer-integrated manufacturing, a. 4,100 units
islands of technology, process b. 4,200 units
simplification c. 4,300 units
b. process simplification, traditional, islands of d. 4,400 units
technology, computer-integrated 7. Which of the following define/s or is/are related to
manufacturing Product Family.
c. traditional, islands of technology, process a. A group of related goods produced by the same
simplification, computer-integrated company under the same brand.
manufacturing b. It leverages the customer trust and your loyalty
d. traditional, process simplification, computer- earned for the original brand.
integrated manufacturing, islands of c. Both A and B
technology d. Neither A nor B
8. In the model of lean manufacturing implementation
GROUP 7 QUIZ: THE CONVERSION CYCLE process, the implementation and measuring the progress
stage includes the following, except:
1. Which of the following is not a deficiency of the a. Waste Elimination
Standard Accounting System? b. Multifunctional Teams
a. Inaccurate Cost Allocation c. Environment for Change
b. Promotes Lean Behavior d. Information Systems
c. Time Lag 9. A Computer-Aided Manufacturing (CAM) facility
d. Financial Orientation makes use of group technology cells composed of
2. It records the financial effects of the physical events various types of CNC machines to produce an entire part
that are occurring in the production process. from start to finish in one location.
a. General Ledger a. True
b. Cost Accounting Services b. Computer-Aided Design (CAD)
c. Work Orders c. Computer Integrated Manufacturing (CIM)
d. Management Services d. Island of Technology
3. Pledis Industrial uses 64,000 kilos of one material in 10. Which of the following is an automated production
producing ceramic products. The cost associated with planning and control system used to support inventory
placing each order is ₱40. The carrying cost of one kilo management?
of the material is ₱2. Compute for Pledis Industrial’s a. Materials Requirements Planning
EOQ. b. Manufacturing Requirements Planning
a. 1,400 kilos c. Material Resources Planning
b. 1,500 kilos d. Manufacturing Resources Planning
c. 1,600 kilos 11. Which of the following is an extension of MRP that
d. 1,700 kilos has evolved beyond the confines of inventory
4. The first step in applying Activity-Based Costing is … management and is both a system and a philosophy for
a. Identifying the cost drivers coordinating a wide range of manufacturing activities?
b. Computing a cost rate per cost driver a. Materials Requirements Planning
c. Identifying the activities that consume resources b. Manufacturing Requirements Planning
d. Assigning the cost to products c. Material Resources Planning
5. A type of security which protects the physical records d. Manufacturing Resources Planning
and assets from damage or theft.
a. Administrative Security
12. A document in the batch processing system that c. Manufacturing Requirement Planning
shows the production path that a particular batch of (MRP II)
product follows during manufacturing. d. None of the Above
a. Route sheet 4. Which of the following is not an objective of
b. Bill of materials Material Requirement Planning (MRP)?
c. Work order a. Ensure that adequate raw materials are
d. Production schedule available to the production
b. Maintain the lowest possible level of
13. Value Stream Map works best in highly focused,
inventory on hand
low-volume processes in which real benefit is derived
c. Produce production and purchasing
from reducing repetitive processes by even small
schedules and other information needed
amounts of time. to control production
a. True d. All are objectives of MRP
b. False 5. Which of the following statements is true?
14. Production scheduling is the first activity of the a. MRP integrates product manufacturing,
planning and control function. product engineering, sales order
a. True processing, customer billing, human
b. False resources, and related accounting
functions
15. In the relationship of total inventory cost and order b. MRP II is an automated production
quantity, as the quantity ordered increases, the number planning and control system used to
of ordering events decreases, causing the total annual support inventory management
cost of ordering to decrease. c. ERP integrates departments and
a. True functions across a company into one
system of integrated applications that is
b. False
connected to a single common database
d. None of the statements is true.
6. What best describes the philosophy of lean
Group 7 manufacturing?
1. Is a method of allocating costs to products and a. giving ample time to workers to do their
services to facilitate better planning and control. job
It accomplishes this by assigning cost to b. doing more with less, eliminating waste,
activities based on their use of resources and and reducing production cycle time
assigning cost to cost objects based on their use c. reduction of workers in the
of activities. manufacturing environment
a. Traditional Costing d. elimination of improper work etiquette
b. Activity-based Costing in the manufacturing process
c. Standard Costing 7. All are principles characterizing lean
d. Value Stream Accounting manufacturing, except:
2. This type of valuation method includes all the a. waste minimization
costs associated with the product family, but b. inventory reduction
makes no distinction between direct costs and c. perfect quality
indirect costs. d. Push Processing
a. Traditional Costing 8. The progression of automation toward world-
b. Activity-based Costing class status includes the following, except:
c. Standard Costing a. Traditional
d. Value Stream Accounting b. Computer Integrated Manufacturing
3. It is an automated production planning and c. Islands of Technology
control system used to support inventory d. New Era
management. 9. Which of the following best describes Value
a. Enterprise Resource Planning (ERP) Stream Mapping?
b. Material Requirement Planning (MRP)
 a. It can evaluate the technical feasibility a. Move Ticket
of the product and determine its b. Production schedule
‘‘manufacturability.’ c. Work order
b. monitors and controls the production d. Route sheet
process and routing of products through
the cell
c. it graphically represents business
processes to identify aspects of it that
are wasteful and should be removed
d. programmed to perform specific actions
over and over with a high degree of
precision and are widely used in
factories to perform jobs such as
welding and riveting
10. Which of the following is the heart of the lean
manufacturing philosophy?
a. Robotics
b. physical reorganization of the
production facilities
c. automation of the manufacturing
process
d. islands of technology
11. Which of the following is not a basic process of
traditional batch production model?
a. Plan and control production
b. Perform production operation
c. Bill of materials
d. Perform cost accounting
12. It specifies the types and quantities of the raw
materials and subassemblies used in producing a
single unit of finished product.
a. Bill of materials
b. Production schedule
c. Route sheet
d. Work order
13. Document that authorizes the storekeeper to
release materials (and subassemblies) to
individuals or work centers in the production
process.
a. Bill of materials
b. Move Ticket
c. Materials Acquisition
d. Route Sheet
14. It is an additional inventories that must be added
to the reorder point to avoid unanticipated stock-
out events.
a. Lead time
b. Safety Stock
c. Back-order
d. Raw materials
15. It shows the production path that a particular
batch of product follows during manufacturing.
 9. When evaluating decision alternatives, one option is
to take no action.
10. In most cases intangible decision criteria can be
quantified.
11. One benefit of the Management Reporting System is
that it can alert management to delays in project
implementation.
12. Responsibility refers to an individual’s obligation to
achieve desired results.
13. A firm with a wide span of control tends to have
relatively more layers of management.
14. The control function entails evaluating a process
against a standard and, if necessary, taking
corrective action.
15. Standards are the basis for evaluating actual
performance.
16. A report is said to have information content if it
eliminates uncertainty associated with a problem
facing the decision maker.
17. An inventory out-of-stock report is an example of a
programmed, on-demand report.
18. A principle of responsibility accounting is that
managers are responsible for controllable and
uncontrollable costs.
19. The manager of a cost center is responsible for cost
control and revenue generation.
CHAPTER 8 — FINANCIAL REPORTING AND 20. Designing an effective management reporting
MANAGEMENT REPORTING SYSTEMS system does not require an understanding of the
information managers need to deal with the
TRUE/FALSE (True – Red) problems they face.
21. The formalization of tasks principle suggests that
1. The most common means of making entries in the management should structure the firm around the
general ledger is via the journal voucher. unique skills sets of key individuals.
2. Individuals with access authority to general ledger 22. If a manager delegates responsibility to a
accounts should not prepare journal vouchers. subordinate, he or she must also grant the
3. The journal voucher is the document that authorizes subordinate authority to make decisions.
entries to be made to the general ledger. 23. Operational control involves motivating managers at
4. Each account in the chart of accounts has a separate all levels to use resources, including materials,
record in the general ledger master file. personnel, and financial assets, as productively as
5. The responsibility center file is primarily used by the possible.
Financial Reporting System. 24. The block code is the coding scheme most
6. Management reporting is often called discretionary appropriate for a chart of accounts.
reporting because it is not mandated as is financial
reporting. MULTIPLE CHOICES
7. Primary recipients of financial statement information
are internal management. 1. The coding scheme most appropriate for a chart of
8. The Management Reporting System is a accounts is
nondiscretionary system. a. sequential code
b. block code
 c. group code a. a chronological record of all transactions
d. mnemonic code b. the balance of each account in the chart of
2. A common use for sequential coding is accounts
a. creating the chart of accounts c. budget records for each account in the chart of
b. identifying inventory items accounts
c. identifying documents d. subsidiary details supporting a control account
d. identifying fixed assets 9. Which report is not an output of the Financial
3. The most important advantage of sequential coding is Reporting System (FRS)?
that a. variance analysis report
a. missing or unrecorded documents can be b. statement of cash flows
identified c. tax return
b. the code itself lacks informational content d. comparative balance sheet
c. items cannot be inserted 10. Which steps in the Financial Accounting Process are
d. deletions affect the sequence in the correct sequence?
4. When a firm wants its coding system to convey a. record the transaction, post to the ledger, prepare
meaning without reference to any other document, it the adjusted trial balance, enter adjusting entries,
would choose prepare financial statements
a. an alphabetic code b. record the transaction, prepare the unadjusted
b. a mnemonic code trial balance, record adjusting journal entries,
c. a group code record closing entries, prepare financial statements
d. a block code c. record the transaction, post to the ledger, record
adjusting entries, prepare the unadjusted trial
balance, prepare financial statements
d. record the transaction, post to the ledger, prepare
the adjusted trial balance, prepare financial
5. The most important advantage of an alphabetic code is statements, record closing entries
that 11. Which statement is not correct?
a. meaning is readily conveyed to users a. the post-closing trial balance reports the ending
b. sorting is simplified balance of each account in the general ledger
c. the capacity to represent items is increased b. one purpose of preparing the unadjusted trial
d. missing documents can be identified balance is to ensure that debits equal credits
6. Entries into the General Ledger System (GLS) can be c. financial statements are prepared based on the
made using information from unadjusted trial balance
a. the general journal d. the unadjusted trial balance reports control
b. a journal voucher which represents a summary account balances but omits subsidiary ledger
of similar transactions detail
c. a journal voucher which represents a single, 12. What account appears on the postclosing trial
unusual transaction balance?
d. all of the above a. income summary
7. Which statement is not correct? The general ledger b. machinery
master file c. rent expense
a. is based on the firm’s chart of account d. interest income
b. contains a record for control accounts 13. Financial statements are prepared from the
c. is an output of the Financial Reporting System a. trial balance
(FRS) b. adjusted trial balance
d. supplies information for management decision c. general ledger
making d. general journal
8. What type of data is found in the general ledger 14. Risk exposures in the General Ledger and Financial
master file? Reporting Systems include all of the following except
 a. loss of the audit trail c. there is a time lag between transaction
b. unauthorized access to the general ledger processing and posting to the general ledger
c. loss of physical assets d. no direct access or querying of the General
d. general ledger account out of balance with the Ledger is possible
subsidiary account 19. An advantage of a batch General Ledger System
15. Which situation indicates an internal control risk in (GLS) is that
the General Ledger/Financial Reporting Systems a. separation between authorization and transaction
(GL/FRS)? processing is strictly enforced
a. the employee who maintains the cash journal b. the general ledger master file is recreated with
computes depreciation expense each update
b. the cash receipts journal voucher is approved by c. updates and reconciliation of transactions occur
the Treasurer as a step within the transaction cycle
c. the cash receipts journal vouchers are d. errors and out-of-balance conditions are
prenumbered and stored in a locked safe identified at the end of the month
d. the employee who maintains the cash receipts 20. A characteristic of the Management Reporting
journal records transactions in the accounts System (MRS) is
receivable subsidiary ledger a. the MRS operates in conformity with generally
accepted accounting principles
b. it is a legal requirement that the MRS be
installed and functioning properly
c. the MRS is developed by implementing SEC
requirements
16. With a limited work force and a desire to maintain d. the MRS focuses on internal decision-making
strong internal control, which combination of duties information
performed by a single individual presents the least risk 21. Which statement is not true?
exposure? a. authority refers to an individual’s obligation to
a. maintaining the inventory ledger and recording achieve desired results
the inventory journal voucher in the general ledger b. if an employee is given the responsibility for a
b. recording the inventory journal voucher in the task, that employee should be given authority to
general ledger and maintaining custody of make decisions within the limits of that task
inventory c. the level of detail provided to an employee is a
c. maintaining the cash disbursements journal and function of the employee’s position with the firm
recording direct labor costs applied to specific d. all of the above are true
jobs 22. Which statement is not true? The manager’s span of
d. preparing the accounts payable journal voucher control
and recording it in the general ledger a. is narrow for routine and repetitive tasks
17. The audit trail fulfills all of the following purposes b. is related to the number of layers of management
except c. affects the amount of detail provided to a
a. provides the ability to answer inquiries manager
b. ensures the accuracy of the application software d. can affect employee morale and motivation
c. fulfills governmental regulations 23. Short-range planning involves
d. offers a means for preventing, detecting, and a. setting goals and objectives of the firm
correcting errors b. planning the production schedule for the next
18. Which best describes a batch process General Ledger quarter
System (GLS) c. planning the growth of the firm
a. paper documents are eliminated d. deciding on the degree of diversification among
b. the general ledger master file is updated each the firm’s products
night 24. Long-range planning involves
 a. planning the marketing and promotion for a c. inventory exception reports for Division G
product d. equipment utilization reports for Plant M
b. presenting department heads with budgetary 32. A fundamental principle of responsibility accounting
goals for the next year is that
c. preparing a work force utilization budget for the a. managers are accountable only for items they
next quarter control
d. deciding the optimum size of the firm b. a manager’s span of control should not exceed
25. The level of management that makes tactical eight people
planning decisions is c. structured reports should be prepared weekly
a. top management d. the information flow is in one direction, top-
b. middle management down
c. operations management 33. Which statement is not true? Responsibility
d. front-line management accounting
26. The decision to enter a new market is an example of a. involves both a top-down and bottom-up flow of
a. strategic planning information
b. tactical planning b. acknowledges that some economic events cannot
c. management control be traced to any manager
d. operational control c. creates a budget
27. All of the following are elements of operational d. compares actual performance with budget
control decisions except 34. What mechanism is used to convey to managers the
a. determining the scope of the activity standards by which their performance will be measured?
b. setting operating standards a. the responsibility report
c. evaluating performance b. the scheduled report
d. taking corrective action when necessary c. the budget
28. In contrast to tactical planning decisions, d. all of the above
management control decisions, and operational control 35. All of the following concepts encourage goal
decisions, strategic planning decisions usually congruence except
a. are more focused a. detailed information reporting at all
b. have a shorter time frame management levels
c. are unstructured b. authority and responsibility
d. have a high degree of certainty c. formalization of tasks
29. Which of the following management principles d. responsibility accounting
affects the management reporting system? 36. Which of the following statements is NOT true?
a. formalization of tasks a. Sorting records that are coded alphabetically
b. authorization tends to be more difficult for users than sorting
c. span of control numeric sequences.
d. all of the above b. Mnemonic coding requires the user to memorize
30. All of the following are elements of problem codes.
structure except c. Sequential codes carry no information content
a. certainty beyond their order in the sequence.
b. data d. Mnemonic codes are limited in their ability to
c. procedures represent items within a class.
d. objectives 37. Which file has as its primary purpose to present
31. All of the following are examples of programmed comparative financial reports on a historic basis?
reports except a. journal voucher history file
a. cash flow reports for Division B b. budget master file
b. year-to-date local income tax payments made by c. responsibility file
all employees living in City X and working in d. general ledger history file
City Y
38. All of the following are characteristics of the 3. The decision to enter a new market is an example of
strategic planning process except the ___________.
a. emphasis on both the short and long run. a. Strategic planning
b. review of the attributes and behavior of the b. Tactical planning
organization’s competition. c. Management control
c. analysis of external economic factors. d. Operational control
d. analysis of consumer demand. 4. Which of the following management principles affects
39. Which of the following performance measures can the management reporting system?
not result in dysfunctional behavior? a. Formalization of tasks
a. price variance b. Authorization
b. quotas c. Span of control
c. ROI d. All of the above
d. net income 5. It uses tags to identify each piece of financial data,
e. all of the above can result in dysfunctional which then allows it to be used programmatically by a
behavior compatible program. It also allows an easy transmission
40. Which of the following best describes a profit center: of data between businesses.
a. authority to make decisions affecting the major a. XBL
determinants of profit, including the power to b. XBRL
choose its markets and sources of supply. c. Either XBL or XBRL
b. authority to make decisions affecting the major d. Neither XBL or XBRL
determinants of profit, including the power to 6. Responsibility center file contains the following
choose its markets and sources of supply, and except:
significant control over the amount of invested a. Revenues
capital. b. Expenditures
c. authority to make decisions over the most c. Budgeted Revenues
significant costs of operations, including the d. Other Resource Utilization Data
power to choose the sources of supply. 7. Which is not part of the report attributes?
d. authority to provide specialized support to other a. Accuracy
units within the organization. b. Completeness
e. responsibility for combining the raw materials, c. Catchy
direct labor, and other factors of production into a d. Exception Orientation
final product. 8. Programmed reporting has two subclasses which are:
I. Adhoc Report
GROUP 8 QUIZ: FINANCIAL REPORTING AND II. Scheduled Report
MANAGEMENT REPORTING SYSTEMS III. On-demand Report
IV. Management Report
1. This file provides a record of all general ledger a. I & III
transactions and replaces the traditional general journal. b. II & IV
a. Journal voucher file c. II & III
b. Journal voucher history file d. I & IV
c. General ledger master file 9. It involves sophisticated techniques such as database
d. General ledger history file queries and artificial intelligence.
2. The level of management that makes tactical planning a. Data warehousing
decisions is _________. b. Adhoc reporting
a. Top management c. Data mining
b. Middle management d. Management report
c. Operations management 10. It is known to be as the formal vehicle to convey
d. Front-line management information.
a. Accounting
 b. Financial statements transaction can be accurately traced through the
c. Report system from initiation to final disposition.
d. File a. Master File
11. Operational control involves motivating managers at b. XBRL Instant Documents
all levels to use resources, including materials, c. Audit Trail
personnel, and financial assets, as productively as d. None of the above
possible.
a. True 4. Individuals with access authority to GL accounts
b. False should not, except:
12. The formalization of tasks principle suggests that a. Have record-keeping responsibility for
special journals or subsidiary ledgers
management should structure the firm around the unique
b. Prepare journal vouchers
skills sets of key individuals.
c. Have custody of physical assets
a. True
d. All of the above are correct.
b. False
13. According to MDN web docs, XML (Extensible 5. For a report to be useful, it must have:
Markup Language) is a markup language similar to a. report attribute
HTML, with predefined tags to use. b. information overload
a. True c. complete information
b. False d. information content
14. The MRS uses general ledger master file to support
internal information reporting.
6. It is the process of selecting, exploring, and
a. True
b. False modeling large amounts of data to uncover
15. On demand reports are not triggered by events. relationships and global patterns that exist in
a. True large databases but are hidden among the vast
b. False amount of facts.
Group 8 a. data discovering
1. If risks are not controlled it may result in b. data processing
misstated financial statements and other reports,
c. data finding
thus misleading users of this information. The
d. data mining
potential consequences are the following,
except:
a. Significant financial loss 7. This approach uses a drill-down technique to
b. Suctions specified by SEC legislation either verify or reject a user’s hypothesis.
c. Litigation a. data mining
d. All of the above are correct b. ad hoc reporting
c. verification model
2. Which of the following is not correct? d. discovery model
a. End-user computer cannot process XML
and can only display the format. 8. What do you call a report that aims at informing
b. End-user computer can recognize XML managers of different aspects of the business, to
and process help them make better-informed decisions?
c. XBRL is typically used for reporting
a. financial reports
aggregated financial data.
b. ad hoc reports
d. Unauthorized access to the GL accounts
can result in errors, fraud and c. sales report
misrepresentations in financial d. management reports
statements.
9. This management principle suggests that
3. This involves a network of documents, journals, management should structure the firm around
and ledgers designated to ensure that a the tasks it performs rather than around
individuals with unique skills.
 a. Formalization of tasks b. Journal Voucher History File
b. Responsibility and authority c. General Ledger History File
c. Span of control d. General Ledger Master File
d. Management by exception
15. Statement 1: Financial Reporting is the final step
10. This principle suggests that managers should in the overall accounting process.
Statement 2: Journal vouchers for the adjusting
limit their attention to potential problem areas
entries are prepared and posted to the
rather than being involved with every activity or
appropriate accounts in the GL.
decision.
a. Only statement 1 is true.
a. Formalization of tasks
b. Only statement 2 is true.
b. Responsibility and authority
c. Both are true.
c. Span of control
d. Both are false.
d. Management by exception

11. These decisions are shorter term, more specific,

recurring, have more certain outcomes, and have
a lesser impact on the firm than strategic
decisions.
a. Management control decision
b. Tactical planning decision
c. Operational control decision
d. Strategic planning decision

12. It involves motivating managers in all functional

areas to use resources, including materials,
personnel, and financial assets, as productively
as possible.
a. Management control decision
b. Tactical planning decision
c. Operational control decision
d. Strategic planning decision

13. Statement 1: It is assumed that the users of

financial reports do not understand the
conventions and accounting principles that are
applied.
Statement 2: The primary recipients of financial
statement information are internal users, such as
stockholders, creditors and government
agencies.
a. Only Statement 1 is true.
b. Only Statement 2 is true.
c. Both are false.
d. Both are true.

14. Its primary purpose is to provide historical

financial data for comparative financial reports.
a. Journal Voucher File
 9. A customer name and an unpaid balance is an
example of a one-to-many relationship.
10. In the relational model, a data element is called a
relation.
11. Data normalization group data attributes into tables
in accordance with specific design objectives.
12. Under the database approach, data is viewed as
proprietary or “owned” by users.
13. The data dictionary describes all of the data
elements in the database.
14. A join builds a new table by creating links.
15. The deletion anomaly is the least important of the
problems affecting un-normalized databases.
16. A deadlock is a phenomenon that prevents the
processing of transactions.
17. Time stamping is a control that is used to ensure
database partitioning.
18. A lockout is a software control that prevents
multiple users from simultaneous access to data.
19. Logical database design is the foundation of the
conceptual design.
20. An entity is any physical thing about which the
organization wishes to capture data.
21. An ER diagram is a graphical representation of a
CHAPTER 9 — DATABASE MANAGEMENT data model.
SYSTEMS 22. The term occurrence is used to describe the number
of attributes or fields pertaining to a specific entity.
TRUE/FALSE (True – Red) 23. Cardinality describes the number of possible
occurrences in one table that are associated with a
1. The database approach to data management is single occurrence in a related table.
sometimes called the flat file approach. 24. A table in third normal form is free of partial
2. The Database Management System provides a dependencies, multiple dependencies, and transitive
controlled environment for accessing the database. dependencies.
3. To the user, data processing procedures for routine 25. Improperly normalized databases are associated with
transactions, such as entering sales orders, appear to three types of anomalies: the update anomaly, the
be identical in the database environment and in the insertion anomaly, and the deletion anomaly.
traditional environment. MULTIPLE CHOICES
4. An important feature associated with the traditional 1. All of the following are basic data management tasks
approach to data management is the ability to except
produce ad hoc reports. a. data deletion
5. The Data Definition Language is used to insert b. data storage
special database commands into application c. data attribution
programs. d. data retrieval
6. There is more than one conceptual view of the 2. The task of searching the database to locate a stored
database. record for processing is called
7. In the database method of data management, access a. data deletion
authority is maintained by systems programming. b. data storage
8. The physical database is an abstract representation c. data attribution
of the database. d. data retrieval
3. Which of the following is not a problem usually a. by direct query
associated with the flat-file approach to data b. by developing operating software
management? c. by constantly interacting with systems
a. data redundancy programmers
b. restricting access to data to the primary user d. all of the above
c. data storage 11. The Data Definition Language
d. currency of information a. identifies, for the Database Management
4. Which characteristic is associated with the database System, the names and relationships of all data
approach to data management? elements, records, and files that comprise the
a. data sharing database
b. multiple storage procedures b. inserts database commands into application
c. data redundancy programs to enable standard programs to interact
d. excessive storage costs with and manipulate the database
5. Which characteristic is not associated with the c. permits users to process data in the database
database approach to data management? without the need for conventional programs
a. the ability to process data without the help of a d. describes every data element in the database
programmer 12. The Data Manipulation Language
b. the ability to control access to the data a. defines the database to the Database
c. constant production of backups Management System
d. the inability to determine what data is available b. transfers data to the buffer area for manipulation
c. enables application programs to interact with
6. The textbook refers to four interrelated components of and manipulate the database
the database concept. Which of the following is not one d. describes every data element in the database
of the components? 13. Which statement is not correct? A query language
a. the Database Management System like SQL
b. the Database Administrator a. is written in a fourth-generation language
c. the physical database b. requires user familiarity with COBOL
d. the conceptual database c. allows users to retrieve and modify data
7. Which of the following is not a responsibility of the d. reduces reliance on programmers
Database Management System? 14. Which duty is not the responsibility of the Database
a. provide an interface between the users and the Administrator?
physical database a. to develop and maintain the Data Dictionary
b. provide security against a natural disaster b. to implement security controls
c. ensure that the internal schema and external c. to design application programs
schema are consistent d. to design the subschema
d. authorize access to portions of the database 15. In a hierarchical model
8. A description of the physical arrangement of records a. links between related records are implicit
in the database is b. the way to access data is by following a
a. the internal view predefined data path
b. the conceptual view c. an owner (parent) record may own just one
c. the subschema member (child) record
d. the external view d. a member (child) record may have more than
9. Which of the following may provide many distinct one owner (parent)
views of the database? 16. Which term is not associated with the relational
a. the schema database model?
b. the internal view a. tuple
c. the user view b. attribute
d. the conceptual view c. collision
10. Users access the database d. relation
17. In the relational database model 24. Which of the following is not a common form of
a. relationships are explicit conceptual database model?
b. the user perceives that files are linked using a. hierarchical
pointers b. network
c. data is represented on two-dimensional tables c. sequential
d. data is represented as a tree structure d. relational
18. In the relational database model all of the following 25. Which of the following is a relational algebra
are true except function?
a. data is presented to users as tables a. restrict
b. data can be extracted from specified rows from b. project
specified tables c. join
c. a new table can be built by joining two tables d. all are relational algebra functions
d. only one-to-many relationships can be supported 26. Which statement is false?
19. In a relational database a. The DBMS is special software that is
a. the user’s view of the physical database is the programmed to know which data elements each
same as the physical database user is authorized to access.
b. users perceive that they are manipulating a b. User programs send requests for data to the
single table DBMS.
c. a virtual table exists in the form of rows and c. During processing, the DBMS periodically
columns of a table stored on the disk makes backup copies of the physical database.
d. a programming language (COBOL) is used to d. The DBMS does not control access to the
create a user’s view of the database database.
20. The update anomaly in unnormalized databases 27. All of the following are elements of the DBMS
a. occurs because of data redundancy which facilitate user access to the database except
b. complicates adding records to the database a. query language
c. may result in the loss of important data b. data access language
d. often results in excessive record insertions c. data manipulation language
21. The most serious problem with unnormalized d. data definition language
databases is the 28. Which of the following is a level of the database that
a. update anomaly is defined by the data definition language?
b. insertion anomaly a. user view
c. deletion anomaly b. schema
d. none of the above c. internal view
22. The deletion anomaly in unnormalized databases d. all are levels or views of the database
a. is easily detected by users 29. An example of a distributed database is
b. may result in the loss of important data a. partitioned database
c. complicates adding records to the database b. centralized database
d. requires the user to perform excessive updates c. networked database
23. Which statement is correct? d. all are examples of distributed databases
a. in a normalized database, data about vendors 30. Data currency is preserved in a centralized database
occur in several locations by
b. the accountant is responsible for database a. partitioning the database
normalization b. using a lockout procedure
c. in a normalized database, deletion of a key c. replicating the database
record could result in the destruction of the audit d. implementing concurrency controls
trail 31. Which procedure will prevent two end users from
d. connections between M:M tables is provided by accessing the same data element at the same time?
a link table a. data redundancy
b. data replication
 c. data lockout c. transaction processing response time is
d. none of the above improved
32. The advantages of a partitioned database include all d. partitioning can reduce losses in case of disaster
of the following except 39. Each of the following is a relational algebra function
a. user control is enhanced except
b. data transmission volume is increased a. join
c. response time is improved b. project
d. risk of destruction of entire database is reduced c. link
33. A replicated database is appropriate when d. restrict
a. there is minimal data sharing among information
processing units
b. there exists a high degree of data sharing and no
primary user
c. there is no risk of the deadlock phenomenon
d. most data sharing consists of read-write
transactions

34. What control maintains complete, current, and GROUP 9 QUIZ: DATABASE MANAGEMENT
consistent data at all information processing units? SYSTEMS
a. deadlock control
b. replication control 1. At the physical level, the database is a collection of
c. concurrency control records and files. Relational databases are based on the
d. gateway control _____ structure. This structure uses an index in
35. Data concurrency conjunction with a sequential file organization.
a. is a security issue in partitioned databases a. Inverted sequential list
b. is implemented using timestamping b. Indexed symmetrical file
c. may result in data lockout c. Indexed sequential file
d. occurs when a deadlock is triggered d. Indexed conjunctional file
36. Entities are 2. Which of the following is not a feature of database
a. nouns that are depicted by rectangles on an management system?
entity relationship diagram a. Database usage reporting
b. data that describe the characteristics of b. Database access
properties of resources c. Both a and b
c. associations among elements d. Neither a nor b
d. sets of data needed to make a decision 3. It is a programming language used to define the
37. A user view physical database to the Database Management System.
a. presents the physical arrangement of records in a a. Data Definition Language (DDL)
database for a particular user b. Data Definition Speech (DDS)
b. is the logical abstract structure of the database c. Data Description Language (DDL)
c. specifies the relationship of data elements in the d. None of the Above
database 4. Which of the following statements are correct?
d. defines how a particular user sees the database I. The conceptual view or schema represents the
38. All of the following are advantages of a partitioned database logically and abstractly, rather
database except than the way it is physically stored.
a. increased user control by having the data stored II. The user view presents the physical arrangement
locally of records in the database. This is the lowest level of
b. deadlocks are eliminated
 representation, which is one step removed from the b. (1) an entity must consist of two or more
physical database. occurrences and (2) an entity must
III. The internal view defines how a particular user contribute more than one attribute that is not
sees the portion of the database that he or she is provided through other entities
authorized to access. To the user, the internal view is the
database. c. (1) an entity must consist of two or more
a. Only statement I is correct. occurrences and (2) an entity must
b. Statements I and II are correct. contribute at least one attribute that is not
c. Statements I, II, II are correct. provided through other entities
d. No statement is correct. d. (1) an entity must consist of one or more
5. This position is responsible for managing the occurrences and (2) an entity must
database resource and this does not exist in the flat-file contribute at least two attributes that are not
environment. provided through other entities
a. Database assessor
b. Database administrator
c. Database personnel
d. None of the above

6. This anomaly results from data redundancy in a

table that is not normalized. 10. A transitive dependency
a. Update anomaly a. Occurs when one or more non-key attributes
b. Repetitive anomaly are dependent on (defined by) only part of
c. Insertion anomaly the primary key, rather than the whole key
d. Deletion anomaly b. Is one of the three anomalies that result from
7. To be free of anomalies, tables must be normalized not normalized database tables
to the _______. c. Occurs in a table where non-key attributes
a. 1NF are dependent on another non-key attribute
b. 2NF and independent of the table’s primary key
c. 3NF d. None of the above
d. 4NF 11. What are the two basic options in addressing the
8. What is the correct order of steps involved in issue regarding the location of the organization's
creating relational database? database?
I. Normalize the data model and add foreign keys a. Centralized and decentralized
II. Prepare the user views b. Distributed and undistributed
III. Construct a data model showing entity c. Centralized and Distributed
associations d. Decentralized and Undistributed
IV. Identify entities 12. Statement I: Storing data at local sites increases
V. Add primary keys and attributes to the users’ control.
model VI. Construct the physical database Statement II: Permitting local access to data and
a. IV, VI, III, I, V, II reducing the volume of data that must be transmitted
b. IV, III, V, I, VI, II between sites improves transaction processing
c. III, V, IV, I, VI, II response time.
d. III, IV, V, II, I, VI Statement III: Partitioned databases can reduce the
9. To pass as valid entities, what are the two potential for disaster. By having data located at
conditions that needs to be met? several sites, the loss of a single site cannot
a. (1) an entity must consist of one or more terminate all data processing by the organization.
occurrences and (2) an entity must Which of the following statement(s) is (are) the
contribute at least one attribute that is not advantages of partitioned database approach?
provided through other entities a. Statement I and II
 b. Statement I and III 2. Is a programming language used to define the
c. Statement II and III database per se.
d. Statement I, II and III a. Data Definition Language
13. What type of model was an efficient data processing b. Data Manipulation Language
tool for highly structured problems and also called a c. Query Language
navigational database because traversing it requires d. Sign Language
following a predefined path? 3. The following are DBMS features, except:
a. Hierarchical Database Model a. Data Manipulation
b. Network Database Model b. Backup and Recovery
c. Hierarchical Indexed Direct Access Model c. Database Usage Reporting
d. Relational Database Model d. Database Access
14. Statement I: In Hierarchical Database Model, no 4. The functions of Database Administrator are:
child record can have more than one parent. a. Database Planning
Statement II: In Network Database Model, allows a b. Design Implementation
child record to have multiple parents. c. Operation and Maintenance
a. Statement I is false while Statement II is d. All of the above
true. 5. Which of the following is not an advantage of the
Database Approach?
b. Statement I is true while Statement II is a. No data redundancy.
false. b. Single update
c. Both Statement I and II are false. c. Current values:
d. Both Statement I and II are true. d. All are advantages of Database Approach
15. Give the correct order in correcting structural 6. It is used to describe the number of instances or
dependencies. records that pertain to a specific entity
I. The conceptual view or schema represents the a. Entities
database logically and abstractly, rather than the b. Attributes
way it is physically stored. c. Cardinality
II. The user view presents the physical arrangement d. Occurrence
of records in the database. This is the lowest 7. The six phases of database design includes the
level of representation, which is one step following except:
removed from the physical database. a. Construct a data model showing entity
III. The internal view defines how a particular user associations
sees the portion of the database that he or she is b. Add foreign keys and attributes to the model.
authorized to access. To the user, the internal view is the c. Construct the physical database.
database. d. Add primary keys and attributes to the model
a. 2,3,1 8. The three types of anomalies are the following
b. 3,2,1 a. Upgrade, Deletion and Addition
c. 1,2,3 b. Update, Deletion and Improved
d. 2,1,3 c. Update, Deletion and Insertion
d. Upgrade, Deletion and Improved
Group 9 9. The four basic forms of cardinality that are possible
1. It is a method for designing interface between are the following except:
program instructions and data on which a specific data a. many or many
file was created for each application. b. zero or many
a. File-oriented Processing c. one or many
b. Data oriented Processing d. one and only one
c. Conceptual Mapping 10. Which of the following statements is false?
d. Programming
 a. Improperly normalized tables can cause
DBMS processing problems that restrict, or even
deny, users’ access to the information they need.
b. Association is represented with a verb, such
as ships, requests, or receives while cardinality
is the degree of association between two entities.
c. Database normalization is a technical matter
that is usually the responsibility of accounting
professionals.
d. When unnormalized tables are split into
multiple 3NF tables, they need to be linked
together via foreign keys so the data in them can
be related and made accessible to users
11. Second step in view modelling
a. Construct a data model showing entity
associations.
b. Add primary keys and attributes to the model.
c. Normalize the data model and add foreign
keys.
d. Construct the physical database.
12. Every _________ in an entity should appear directly
or indirectly (a calculated value) in one or more user
views
a. Primary Key
b. Foreign Key
c. Attribute
d. Analyst
13. Combining the data needs of all users into a single
schema or enterprise-wide view is called
a. View integration.
b. Internal integration
c. Report Integration
d. None of the above
14. Under the _____________ approach, remote users
send requests via terminals for data to the central site,
which processes the requests and transmits the data back
to the user.
a. Decentralized Database
b. Distributed Database
c. Centralized Database
d. Partitioned Database

15. A ________ occurs here because there is mutual

exclusion to data, and the transactions are in a wait state
until the locks are removed.
a. Deadlock
b. Concurrency Control
c. Database Lockout
d. Temporary Inconsistency
 10. Operating events are activities that produce goods
and services.
11. Decision/management events are activities
associated with recording, maintaining, and
reporting information.
12. Information events are activities that lead to
decisions being made.
13. Entity relationship diagrams include operating,
information, and decision events. Only operating
events are included in an REA model.
14. A data flow diagram is a data modeling tool that
enables organizations to view each business process
in detail.
15. The primary purpose of an ER diagram is to identify
data attributes that represent the conceptual user
views that must be supported by the base tables.
16. The REA approach generates an information system
with only one user view.
17. Organizations that use REA produce financial
statements and reports directly from the event-driven
CHAPTER 10 — THE REA APPROACH data, not from traditional ledgers and journals.
18. The REA model may enhance efficiency and
TRUE/FALSE (True – Red) competitive advantage though often productivity
may decline.
1. According to the REA philosophy, information 19. User views are set by REA modeling.
systems should support only the needs of accounting 20. REA focuses on business activities within business
professionals. processes. It is event-oriented.
2. Many believe that the accounting profession should
shift away from debits and credits toward providing MULTIPLE CHOICES
information that assists decision-making.
3. Modern managers need both financial and 1. Economic resources possess all of the following
nonfinancial information that traditional GAAP- characteristics except
based accounting systems are incapable of a. assets
providing. b. measure expected future receipts
4. The REA model is an alternative accounting c. scarce
framework for modeling an organization’s critical d. under the organization’s control
resources, events, and accounts. 2. The REA approach leads to more efficient
5. In REA, resources are assets of the organization as operations in all of the following ways except
shown on a traditional balance sheet. a. identifying non-value-added activities
6. In REA, events can be operating, information, or b. storage of both financial and nonfinancial
decision/management events. data in the same database
7. REA agents are individuals and departments that c. storage of detailed data to support a wider
participate in an economic event. range of management decisions
8. In a relational database environment, the focus is on d. standardizing data forms for simplicity
transaction events, not the accounting artifacts. 3. Which types of events are included in an REA
9. Under the REA approach to database design, an model?
entity relationship diagram is used to model the a. operating
relationships between an organization’s critical b. decision
resources, events, and agents. c. management
 d. information a. organize events in order, identify resources
4. Decision/management events involve decisions and agents, identify links, identify operating
relating to all of the following except events, assign cardinalities
a. record keeping b. identify operating events, identify resources
b. planning and agents, identify links, assign
c. evaluation cardinalities, organize events in order
d. control c. identify operating events, organize events in
5. Information events involve all of the following order, identify resources and agents, identify
except links, assign cardinalities
a. acts of recording d. identify resources and agents, identify
b. acts of updating operating events, organize events in order,
c. acts of evaluating identify links, assign cardinalities
d. acts of maintaining
6. The “R” in REA stands for
a. ratios
b. relationships
c. resources
d. reserves
7. The “E” in REA stands for 13. Which of the following statement is correct?
a. events a. The REA model requires that phenomena be
b. estimates characterized in a manner consistent with
c. economics the development of a single user view.
d. entities b. The REA model requires that phenomena be
8. The “A” in REA stands for characterized in a manner consistent with
a. assets the development of a selected user view.
b. apportionment c. The REA model requires that phenomena be
c. allocation characterized in a manner consistent with
d. agents the development of a unique user view.
9. Which of the following is an example of a d. The REA model requires that phenomena be
decision/management event? characterized in a manner consistent with
a. preparing cost estimates for a new product the development of a multiple user view.
b. requesting a report 14. Which of the following is not an advantage of using
c. preparing sales invoices the REA model?
d. preparing performance reports a. greater efficiency
10. All of the following are examples of operating b. increased productivity
events except c. more relevant and timely information
a. receiving raw materials from a supplier d. simpler database creation
b. preparing a cash disbursement voucher for 15. Which of the following is not correct?
payment to the supplier a. Operating events trigger information events.
c. paying for inventories received b. Information events trigger operating events.
d. shipping product to a customer c. Decision/management events trigger
11. Which types of events are included in entity operating events.
relationship diagrams? d. Information events trigger
a. operating events decision/management events.
b. information events 16. When developing an REA model, events need to be
c. decision events organized in sequence of
d. all of the above a. completion
12. Which of the following represents the order of the b. length
steps in the preparation of an REA model? c. ease of analysis
 d. occurrence IV. Linking one table to another
17. In an REA model, events are described from the a. , II, III and IV
perspective of b. I,III and IV
a. the organization c. I, II and III
b. the designer d. II, III and IV
c. the user e. None of these
d. the customer 4. Each occurrence of the Verify Availability entity is
18. Which of the following is not an example of an the result of
information event? a. Customer Order
a. updating inventory records after a sale b. Customer Feedback
b. requesting a report c. Customer Inquiry
c. preparing cost estimates for new products d. Customer Service
d. preparing sales invoices

5. It is either an economic or support event which

GROUP 10 QUIZ: THE REA APPROACH involves commitment on the part of the seller to sell
goods to the customer. It may even involve adjusting
1. The following are the anomalies that might exists in (decreasing) the inventory available for sale to
tables that are not normalized except one: prevent it from being sold or promised to other
a. Deletion customers.
b. Update a. Verify Availability
c. Insertion b. Take Order
d. Storage c. Ship Product
2. Which of the following represents the order of the d. Receive Cash
steps in the preparation of a REA model? 6. Which of the following is not an example of Support
a. Identify the resource entities, identify the Event?
agent entities, identify the event entities, a. Checking customer credit
determine associations and cardinalities b. Determining inventory availability
between entities c. Verifying supporting information
b. Identify the event entities, identify the agent d. Purchasing of raw materials from vendors
entities, determine associations and 7. This act does constitute a support event and a
cardinalities between entities, identify the commitment to buy.
resource entities a. Order Product
c. Identify the event entities, identify the b. Receive Product
resource entities, identify the agent entities, c. Disburse Cash
determine associations and cardinalities d. Take Order Entity
between entities 8. Many researchers believe that the accounting
d. Identify the agent entities, identify the event profession should shift away from debits and credits
entities, identify the resource entities, toward providing information that assists decision-
determine associations and cardinalities making.
between entities a. True
3. Designing a relational database involves what b. False
activities? 9. Under the REA approach to database design, an
I. Determining primary keys entity relationship diagram is used to model the
II. Defining attributes relationships between an organization’s critical
III. Assigning foreign keys resources, events, and agents.
 a. False 14. Statement 1: Resource and agent tables start out
b. True empty and will be populated through actual
10. Statement 1: Tables in every association can accept transaction processing activities.
an embedded foreign key from its related table. Statement 2: Event tables must be initialized with
Statement 2: All non-key attributes are independent data values such as inventory quantities on hand,
from each other and but is dependent from the customer names and addresses, and employee data.
primary key. a. True, True
a. True, True b. False, False
b. False, False c. False, True
d. True, False
c. False, True
15. Statement 1: Traditional accounting mechanisms
d. True, False such as journals are entities of the REA model.
11. Statement 1: Get Time event includes a worker Statement 2: In a 1:1 association, when the foreign
(external agent) giving up his or her time, which is key that is embedded in the 1,1 cardinality is the
characterized by the Employee Services resource primary key of the side of the association with 0,1
and the supervisor (internal agent) shoulders control cardinality, the link will not work.
of the resource. a. True, True
b. False, False
Statement 2: The Disburse Cash event is the give
c. False, True
half of the economic exchange. This comprises d. True, False
distributing cash to an employee (now the external Group 10
agent) for services rendered and the payroll clerk 1. They are the individuals within and outside the
(internal agent) joins in this event, which reduces the organization who participate in an economic
cash resource. event and has the discretionary power to use or
a. True, False dispose economic resources.
b. False, True a. Share holders
c. False, False b. Agents
d. True, True c. User
12. What are the four basic forms of cardinality? d. Clerk
a. one and many (1,M), zero or many (0,M), 2. REA modeling embraces two events which are;
one and only one (1,1), and zero and one a. Ecological events and system events
(0,1) b. Ecological events and sampling events
b. zero and many (0,M), zero and one (0,1), c. Economic events and system events
one or many (1,M), and one or only one d. Economic events and support events
(1,1) 3. Which of the following are characteristics of
c. zero or one (0,1), one and only one (1,1), economic agents?
zero or many (0,M), and one or many (1,M) a. They participate in economic events, but
d. one or only one (1,1), one and many (1,M), do not assume control of the resources.
zero or one (0,1), and zero and many (0,M) b. They participate in economic events, but
13. Statement 1: Customer is the only external agent not in support events.
associated with all four economic event entities. c. Internal agents are employees of the
Statement 2: The sales representative is an internal company whose system is being
agent who partakes in the first economic event entity modeled.
while shipping clerk is an external agent who takes d. All of the above describe agents
part in the third economic event entity. 4. This purports the rationale behind an economic
a. True, False transaction is that two agents each give the other
b. False, False a resource in exchange for another resource.
c. True, True a. Duality
d. False, True b. Bilateral
c. Financial transaction
d. Exchange
5. Which of the following describes the differences associated with a single occurrence in a related
of an ER Diagram to a REA Diagram? entity.
I. ER Diagrams are of one class and their Statement 2: Cardinality is the nature of the
proximity is determined by their cardinality. relationship between two entities, as the labeled
While, REA Diagram are divided into three line connecting them represents.
classes and organized into constellations by
class on the diagram a. Statement 1 is FALSE but Statement 2
II. REA Diagrams are typically organized from is CORRECT
top to bottom within the constellation to focus b. Statement 2 is CORRECT and
on the sequence of event. While, ER Diagrams Statement 1 is CORRECT
present a static picture of the underlying c. Statement 1 is CORRECT but Statement
business phenomena 2 is FALSE
III. In ER Diagrams, entity names are always d. Statement 2 is FALSE and Statement 1
represented in the singular noun form. REA is FALSE
modeling applies this rule when assigning names 10. A fundamental precept of REA is the ________
to resource and agent activities. However, in of accounting artifacts, including journals,
REA Diagrams, event entities represent and ledgers, and double-entry bookkeeping.
describes data tables that will store data about a. Outsourcing
processes, but they are not representing or b. Analysis
describing the processes themselves. c. Rejection
a. I only d. Classification
b. III only 11. It is the Second Step in the View Integration
c. I and II Process in REA.
d. All are correct a. Define the primary keys, foreign keys,
6. Which of the following is true? and attributes
a. REA diagram entities are arranged in b. Construct the physical database and
constellations by entity class. produce user views.
b. ER diagrams present a static picture of c. Consolidate the individual models.
the underlying business phenomena. d. There is no second step in such process.
c. Entity names in ER diagrams are always 12. These advantages have drawn great attention to
in the noun form. REA as a theoretical model for system and
d. Events entity names in REA diagrams database design, except:
are in the verb form. a. Detailed Specificity
e. All of the above are true statements. b. Value chain analysis
7. A model that captures the operational meaning c. Systems integration
of the user’s data and provides a concise d. Operational efficiency
description of it. 13. The concept of duality means that an REA
a. Systemic diagram must consist of
b. Semantic Model a. two events—one of them economic and
c. REAL Model the other support.
d. REA Model b. two agents—one of them internal and
8. The following are the differences between ER the other external.
and REA Diagrams, except: c. two resources—one increased and the
a. visually in a significant way other decreased by the same event.
b. sequencing of events d. all of the above.
c. naming conventions for entities 14. Which of the following about support activites
d. determined by their cardinality is/are false?
9. Statement 1: Association describes the number
of possible occurrences in one entity that are
 a. It includes control, planning, and
management activities that are related to
economic events.
b. It involves information not resources
c. It has direct effect on change of
resources.
d. All of the above are correct.
15. Which of the following does not describe
difference between ER Diagram and REA
Diagram?
a. ER: describes relationship thru
cardinality, REA: divided in three
classes organized in constellations by
class on the diagrams.
b. ER: presents logical flow of process and
relationship among entities, REA: it
deals more on physical relationship
among key elements.
c. ER: present a static picture of the
underlying business phenomena., REA:
typically organized from top to bottom
within the constellations to focus on the
sequence of events.
d. ER: entity names are always represented
in the singular noun form, REA: applies
this rule when assigning names to
resource and agent entities while Event
entities, however, are given verb.
 12. The client/server model is a form of network
technology in which user computers, called clients,
access ERP programs and data via a host computer
called a server.
13. A data warehouse is a relational or multi-
dimensional database that may require hundreds of
gigabytes of storage.
14. Drill-down capability is an OLAP feature of data
mining tools.
15. Supply-chain management software is a type of
program that supports efforts relative to moving
goods from the raw material stage to the customer.
16. In two-tier architecture, the database and application
functions are separated.
17. Slicing and dicing permits the disaggregation of data
to reveal underlying details.
18. Data entered into the data warehouse must be
normalized.
19. OLAP includes decision support, modeling,
information retrieval, and what-if analysis.
CHAPTER 11 — ENTERPRISE RESOURCE 20. Efficient supply-chain management provides firms
PLANNING SYSTEMS with a competitive advantage.
21. The big-bang approach involves converting from old
TRUE/FALSE (True – Red) legacy systems to the new ERP in one
implementation step.
1. The primary goal of installing an ERP system is 22. In two-tier architecture approach is used primarily
reducing system maintenance costs. for wide area network (WAN) applications.
2. The recommended data architecture for an ERP 23. Data cleansing is a step performed by external
includes separate operational and data warehouse auditors to identify and repairing invalid data prior
databases. to the audit.
3. Closed database architecture shares data easily.
4. ERP systems support a smooth and seamless flow of MULTIPLE CHOICES
information across organizations.
5. OLAP stands for on-line application processing. 1. Goals of ERP include all of the following except
6. The primary goal of installing an ERP system is a. improved customer service
achieving business process reengineering to improve b. improvements of legacy systems
customer service, reduce production time, increase c. reduced production time
productivity, and improve decision-making. d. increased production
7. Day-to-day transactions are stored in the operational 2. Core applications are
database. a. sales and distribution
8. Data mining typically focuses on the operational b. business planning
databases. c. shop floor control and logistics
9. Companies are more likely to modify an ERP to d. all of the above
accommodate the company than to modify company 3. Data warehousing processes does not include
processes to accommodate the ERP. a. modeling data
10. If a chosen ERP cannot handle a specific company b. condensing data
process bolt-on software may be available. c. extracting data
11. Core applications are also called OLAP. d. transforming data
4. Which of the following is usually not part of an b. ERP fails because some important business
ERP’s core applications? process is not supported.
a. OLTP applications c. When a business is diversified, little is
b. sales and distribution applications gained from ERP installation.
c. business planning applications d. The phased-in approach is more suited to
d. OLAP applications diversified businesses.
5. Which of the following is usually not part of an 10. Which statement is true?
ERP’s OLAP applications? a. ERPs are infinitely scalable.
a. logistics b. Performance problems usually stem from
b. decision support systems technical problems, not business process
c. ad hoc analysis reengineering.
d. what-if analysis c. The better ERP can handle any problems an
6. Which of the following statements is least likely to organization can have.
be true about a data warehouse? d. ERP systems can be modified using bolt-on
a. It is constructed for quick searching and ad software.
hoc queries. 11. Auditors of ERP systems
b. It was an original part of all ERP systems. a. need not worry about segregation of duties
c. It contains data that are normally extracted b. may feel that the data warehouse is too clean
periodically from the operating databases. and free from errors
d. It may be deployed by organizations that c. find independent verification easy
have not implemented an ERP. d. need not worry about system access since
7. Which of the following statements is not true? the ERP determines it
a. In a typical two-tier client server system, the 12. Legacy systems are
server handles both application and database a. old manual systems that are still in place
duties. b. flat file mainframe systems developed
b. Client computers are responsible for before client-server computing became
presenting data to the user and passing user standard
input back to the server. c. stable database systems after debugging
c. In three-tier client server architecture, one d. advanced systems without a data warehouse
tier is for user presentations, one is for 13. A data mart is
database and applications, and the third is a. another name for a data warehouse
for Internet access. b. a database that provides data to an
d. The database and application functions are organization’s customers
separate in the three-tier model. c. an enterprise resource planning system
8. Which statements about data warehousing is not d. a data warehouse created for a single
correct? function or department
a. The data warehouse should be separate from 14. Most ERPs are based on which network model?
the operational system. a. peer to peer
b. Data cleansing is a process of transforming b. client-server
data into standard form. c. ring topology
c. Drill-down is a data-mining tool available to d. bus topology
users of OLAP. 15. On-line transaction processing programs
d. Normalization is a requirement of databases a. are bolt-on programs used with
included in a data warehouse. commercially available ERSs
9. Which statement about ERP installation is least b. are available in two models–two-tier and
accurate? three-tier
a. For the ERP to be successful, process c. handle large numbers of relatively simple
reengineering must occur. transactions
 d. allow users to analyze complex data a. True
relationships b. False
16. Supply chain management software 18. An ERP system could exist without having a data
a. is typically under the control of external warehouse.
partners in the chain a. True
b. links all of the partners in the chain, b. False
including vendors, carriers, third-party 19. Online Analytical Processing (OLAP) events is
firms, and information systems providers consist of large numbers of relatively simple
c. cannot be integrated into an overall ERP transactions, such as updating accounting records
d. none of the above that are stored in several related tables.
17. The setup of a data warehouse includes a. True
a. modeling the data b. False
b. extracting data from operational databases 20. In ERP systems configuration, “two-tier model” is
c. cleansing the data typically used for local area network (LAN)
d. all of the above applications for which the demand on the server is
18. 18. Extracting data for a data warehouse restricted to a relatively small population to users.
a. cannot be done from flat files a. True
b. should only involve active files b. False
c. requires that the files be out of service 21. It is a relational or multidimensional database that
d. follows the cleansing of data may consume hundreds of gigabytes or even
19. Data cleansing involves all of the following except terabytes of disk storage.
a. filtering out or repairing invalid data a. Data Mart
b. summarizing data for ease of extraction b. Data Extraction
c. transforming data into standard business c. Data Warehousing
terms d. Data Mining
d. formatting data from legacy systems 22. Administrators and line managers may create new
20. Separating the data warehouse from the operations roles, modify existing roles, and delete roles that are
databases occurs for all of the following reasons no longer needed in RBAC. Creating a role involves
except defining the following role attributes except:
a. to make the management of the databases a. A stated set of business responsibilities to be
more economical performed within the role.
b. to increase the efficiency of data mining b. The ethical behaviors taken into account in
processes performing the duties of the role
c. to integrate legacy system data into a form c. The technical competencies needed to
that permits entity-wide analysis perform the role.
d. to permit the integration of data from d. The specific transactions (permissions)
diverse sources required to carry out the stated
responsibilities.
GROUP 11 QUIZ: ENTERPRISE RESOURCE 23. The following are the reasons data warehouses must
PLANNING SYSTEMS be created and maintained separately from the
operational databases, except:
16. Enterprise Research Planning integrates key a. Consolidation of Global Data
processes of the organization such as order entry, b. Smooth and Economic Growth
manufacturing, procurement and accounts payable, c. Internal Efficiency
payroll, and human resources. d. Integration of Legacy Systems
a. True 24. What is the difference between the traditional access
b. False control list approach and the role-based access
17. ERP Business Analysis Application operationally control (RBAC)?
supports the day-to-day activities of the business
 a. RBAC assigns access permissions to the a. Extracting, converting, and standardizing an
role an individual play in the organization organization’s operational data from ERP
rather than directly to the individual, which and legacy systems and loading it into
is portrayed in the traditional approach b. Collecting data from operational databases,
b. The traditional approach allows multiple flat files, archives, and external data sources.
access to a single user while RBAC only c. Sophisticate techniques that use database
allows one access per user. queries and artificial intelligence
c. The traditional approach conveniently d. Transforming data into standard business
handles many-to-many relationships terms with standard data values.
between users and permissions and 28. Which of the following is not true regarding the risk
facilitates dealing efficiently with vast of experiencing high cost and cost overruns?
numbers of employees better than the a. Integration and testing are done on a case-by
RBAC. case basis; thus, the cost is extremely
d. The traditional approach model is very difficult to estimate in advance.
flexible when allowing for the assignment of b. Training costs are invariably higher than
specific access privileges to individuals estimated because management focuses
while the RBAC is quite inflexible. primarily on the cost of teaching employees
25. Which of the following is false regarding data the new software.
warehousing process? c. An increase in hardware capacity by a factor
a. Data contained in a data warehouse are in of x will decrease query response time by no
volatile, unstable status less than a factor of x in a scalable system
b. Normalizing data in an operational database d. More often, the data in the legacy system are
is necessary to reflect accurately the not reliable (sometimes called dirty).
dynamic interactions among entities.
c. To improve efficiency, data can be 29. This approach is particularly suited to diversified
transformed into summary views before they organizations whose units do not share common
are loaded into the warehouse. processes and data.
d. Relational theory does not apply to a data a. Scalability
warehousing system because the Sales b. Phased-in
Order/Product relation is stable. c. Big Bang
26. The following should be done by the management d. Traditional
before engaging an outside consultant, except: 30. Role-based governance systems allow managers to
a. Conduct reference checks of the proposed do the following, EXCEPT:
staff members. a. View the current and historical inventory of
b. Align the consultants’ interests with those of roles, permissions granted, and the
the organization by negotiating a pay-for- individuals assigned to roles.
performance scheme based on achieving b. Identify unnecessary or inappropriate access
certain milestones in the project. entitlements and segregation-of-duties
c. Set a firm termination date for the consultant violations.
to avoid consulting arrangements becoming c. Verify that changes to roles and entitlements
interminable, resulting in dependency and an have been successfully implemented.
endless stream of fees. d. Monitor for risk periodically upon notice of
d. Interview the staffs proposed for the project the top management.
and draft a provisional contract with the
names of the members of the consulting Group 11
team and their respective tasks 1. This system supports a smooth and seamless flow of
27. Data mining involves: information across the organization by providing a
standardized environment for a firm’s business
 processes and a common operational database that a. Modeling data for the warehouse
supports communications. b. Extracting data from operational database
a. Enterprise Resource Planning (ERP) c. Cleansing extracted data
b. Supply Chain Management (SCM) d. All are data warehousing processes
c. Online Analytical Processing (OLAP) 8. It is a technique where it can dramatically reduce the
d. Online Transaction Processing (OLTP) extraction time by capturing only new modified
2. This is a form of network topology in which a user’s data.
computer or terminal (the client) accesses the ERP
programs and data via a host computer called the a. Extracting snapshots
server. b. Changed data capture
a. Web-based Model c. Cleansing extracted data
b. Client-server Model d. Integration of Legacy System
c. Peer-to-peer Model
d. Cloud Computing 9. What is the primary reason for data warehousing?
3. This is the set of activities associated with moving a. to optimize business performance
goods from the raw materials stage to the consumer. b. to secure data properly
This includes procurement, production scheduling,
c. to provide proper collection of data
order processing, inventory management, d. to accommodate industry-specific software
transportation, warehousing, customer service, and 10. A data warehouse is composed of
forecasting the demand for goods. _________________________.
a. Enterprise Resource Planning (ERP)
b. Supply Chain Management (SCM) a. multiple summary views
c. Online Analytical Processing (OLAP) b. system software
d. Online Transaction Processing (OLTP) c. both detail and summary data
d. structural and operational requirements
4. This architecture is typical of large ERP systems that 11. It is the system’s ability to grow smoothly and
use wide area networks (WANs) for connectivity economically as user requirements increase.
among the users. a. Scalability
a. One-tier model b. Internal efficiency
b. Two-tier Model c. System efficiency
c. Three-tier Model d. None of the above
d. Four-tier Model 12. Which of the following is not a dimension of
5. This includes decision support, modeling, scalability?
information retrieval, ad hoc reporting/analysis, and a. Size
what-if analysis. b. Workload
c. Accuracy
a. Enterprise Resource Planning (ERP) d. Transaction cost
b. Supply Chain Management (SCM) 13. Statement I: The two general approaches in ERP
c. Online Analytical Processing (OLAP) implementation are big bang and phase-in approach.
d. Online Transaction Processing (OLTP) Statement II: Phase-in approach is switching
6. It is a set of activities associated with moving goods operations from old legacy system to the new system
from the raw material stage to the customer. in a single event.
a. Data Warehousing a. Statement I is true and statement II is false
b. Bolt-on Software b. Statement I is false and statement II is true
c. Supply Chain Management c. Both statements are true
d. ERP Systems d. Both statements are false
7. Data warehousing has several processes, which of 14. Statement I: The goal of ERP access control is to
the following is not a data warehousing process? maintain data confidentiality, integrity, and
availability.
 Statement II: The fundamental objective of RBAC is 9. The rules that make it possible for users of networks
to provide access in accordance with an to communicate are called protocols.
organization’s needs, which derive from defined 10. A factor that contributes to computer crime is the
tasks rather than an individual’s wants. reluctance of many organizations to prosecute
a. Statement I is true and statement II is false criminals for fear of negative publicity.
b. Statement I is false and statement II is true 11. Cookies are files created by user computers and
c. Both statements are true stored on Web servers.
d. Both statements are false 12. Sniffing is the unauthorized transmitting of
15. It is a system that allow managers to view current information across an Intranet.
and historical inventory of roles, permissions 13. The client-server model can only be applied to ring
granted, and individuals assigned to roles. and star topologies.
a. Enterprise resource planning system 14. The most popular topology for local area networks is
b. Role-based governance system the bus topology.
c. Legacy system 15. A network topology is the physical arrangement of
d. None of the above the components of the network.
16. A bus topology is less costly to install than a ring
topology.
17. In a hierarchical topology, network nodes
communicate with each other via a central host
computer.
18. Polling is one technique used to control data
collisions.
19. The most frequent use of EDI is in making vendor
payments.
CHAPTER 12 — ELECTRONIC COMMERCE 20. EDI is the inter-company exchange of computer
SYSTEMS processible business information in standard format.

TRUE/FALSE (True – Red) MULTIPLE CHOICES

1. Because of network protocols, users of networks 1. The primary difference between a LAN and a WAN
built by different manufacturers are able to is
communicate and share data. a. the geographical area covered by the
2. Electronic commerce refers only to direct consumer network
marketing on the Internet. b. the transmission technology used
3. Business to consumer is the largest segment of c. the type of workstation used
Internet commerce. d. the size of the company
4. The phrase “.com” has become an Internet buzz 2. To physically connect a workstation to a LAN
word. It refers to a top-level domain name for requires a
communications organizations. a. file server
5. The standard format for an e-mail address is b. network interface card
DOMAIN NAME@USER NAME. c. multiplexer
6. The network paradox is that networks exist to d. bridge
provide user access to shared resources while one of 3. One advantage of network technology is
its most important objectives is to control access. a. bridges and gateways connect one
7. Business risk is the possibility of loss or injury that workstation with another workstation
can reduce or eliminate an organization’s ability to b. the network interface card permits different
achieve its objectives. networks to share data
8. IP spoofing is a form of masquerading to gain c. file servers permit software and data to be
unauthorized access to a Web server. shared with other network users
 d. a universal topology facilitates the transfer d. illegal programs downloaded from the Net
of data among networks to sniff passwords from the encrypted data
4. Which topology has a large central computer with of Internet customers
direct connections to a periphery of smaller 9. In a ring topology
computers? Also in this topology, the central a. all nodes are of equal status
computer manages and controls data b. nodes manage private programs and
communications among the network nodes. databases locally
a. star topology c. shared resources are managed by a file
b. bus topology server which is a node on the ring
c. ring topology d. all of the above
d. client/server topology 10. The client/server technology
5. In a star topology, when the central site fails a. increases the amount of data that is
a. individual workstations can communicate transmitted between the central file and the
with each other network node
b. individual workstations can function locally b. eliminates the need for nodes to
but cannot communicate with other communicate with each other
workstations c. reduces the number of records that must be
c. individual workstations cannot function locked by having the file server perform
locally and cannot communicate with other record searches
workstations d. functions only with a ring and bus topology
d. the functions of the central site are taken 11. A star topology is appropriate
over by a designated workstation a. for a wide area network with a mainframe
for a central computer
6. Which of the following statements is correct? The b. for centralized databases only
client-server model c. for environments where network nodes
a. is best suited to the token-ring topology routinely communicate with each other
because the random-access method used by d. when the central database does not have to
this model detects data collisions be concurrent with the nodes
b. distributes both data and processing tasks to 12. In a ring topology
the server’s node a. the network consists of a central computer
c. is most effective used with a bus topology which manages all communications between
d. is more efficient than the bus or ring nodes
topologies b. has a host computer connected to several
7. What do you call a system of computers that levels of subordinate computers
connects the internal users of an organization that is c. all nodes are of equal status; responsibility
distributed over a wide geographic area? for managing communications is distributed
a. LAN among the nodes
b. decentralized network d. information processing units rarely
c. multi-drop network communicate with each other
d. Intranet 13. Which method does not manage or control data
8. Sniffer software is collisions that might occur on a network?
a. software used by malicious Web sites to a. multiplexing
sniff data from cookies stored on the user’s b. polling
hard drive c. carrier sensing
b. used by network administrators to analyze d. token passing
network traffic 14. Network protocols fulfill all of the following
c. used by bus topology Intranets to sniff for a objectives except
carrier before transmitting a message to a. facilitate physical connection between
avoid data collisions network devices
 b. provide a basis for error checking and a. is the document format used to produce Web
measuring network performance pages
c. promote compatibility among network b. controls Web browsers that access the Web
devices c. is used to connect to Usenet groups on the
d. result in inflexible standards Internet
15. All of the following are true about the Open System d. is used to transfer text files, programs,
Interface (OSI) protocol except spreadsheets, and databases across the
a. within one node different layers Internet
communicate with other layers at that node e. is a low-level encryption scheme used to
b. one protocol is developed and applied to all secure transmissions in higher-level format
the OSI layers 20. Which one of the following statements is correct?
c. specific layers are dedicated to hardware a. Cookies always contain encrypted data.
tasks and other layers are dedicated to b. Cookies are text files and never contain
software tasks encrypted data.
d. layers at each node communicate logically c. Cookies contain the URLs of sites visited by
with their counterpart layers across nodes the user.
16. Which of the following statements is correct? d. Web browsers cannot function without
a. TCP/IP is the basic protocol that permits cookies.
communication between Internet sites 21. A message that is made to look as though it is
b. controls Web browsers that access the coming from a trusted source but is not is called
WWW a. a denial of service attack
c. is the file format used to produce Web pages b. digital signature forging
d. is a low-level encryption scheme used to c. Internet protocol spoofing
secure transmissions in HTTP format d. URL masquerading
17. XBRL 22. A digital signature is
a. is the basic protocol that permits a. the encrypted mathematical value of the
communication between Internet sites message sender’s name
b. controls Web browsers that access the Web b. derived from the digest of a document that
c. is the document format used to produce Web has been encrypted with the sender’s private
pages key
d. was designed to provide the financial c. the computed digest of the sender’s digital
community with a standardized method for certificate
preparing d. allows digital messages to be sent over
e. is a low-level encryption scheme used to analog telephone lines
secure transmissions in higher-level (HTTP) 23. HTTP
format a. is the document format used to produce Web
18. FTP pages
a. is the document format used to produce Web b. controls Web browsers that access the Web
pages c. is used to connect to Usenet groups on the
b. controls Web browsers that access the Web Internet
c. is used to connect to Usenet groups on the d. is used to transfer text files, programs,
Internet spreadsheets, and databases across the
d. is used to transfer text files, programs, Internet
spreadsheets, and databases across the e. is a low-level encryption scheme used to
Internet secure transmissions in higher-level format
e. is a low-level encryption scheme used to 24. Which of the following statements is correct?
secure transmissions in higher-level format a. Packet switching combines the messages of
19. HTML multiple users into a “packet” for
transmission. At the receiving end, the
 packet is disassembled into the individual b. Business to Consumer
messages and distributed to the intended c. Consumer to Consumer
users. d. Consumer to Business
b. The decision to partition a database assumes 5. Hyper Text Transport Protocol (HTTP) has the
that no identifiable primary user exists in the control to Web browser that can access in the Web. The
organization. Hyper Text Transport Protocol–New Generation (HTTP-
c. Message switching is used to establish NG) is the more advanced version of the HTTP protocol
temporary connections between network that keeps the simplicity of the HTTP highlighting
devices for the duration of a communication various features like security & authentication.
session. a. True
d. A deadlock is a temporary phenomenon that b. False
disrupts transaction processing. It will 6. A type of attack wherein a hacker sends ping
resolve itself when the primary computer which consequently triggers an echo request message to
completes processing its transaction and the host computer that listens for a response message
releases the data needed by other users. called echo reply.
25. NNTP a. SYN Flood Attack
a. is the document format used to produce Web b. Smurf Attack
pages c. Caesar cipher
b. controls Web browsers that access the Web d. Distributed DDoS
c. is used to connect to Usenet groups on the 7. It is a network security device that tracks incoming
Internet and outgoing network traffic and allows or blocks data
d. is used to transfer text files, programs, packets based on a set of security rules.
spreadsheets, and databases across the a. Firewall
Internet b. Antivirus
e. is a low-level encryption scheme used to c. Advanced encryption standard
secure transmissions in higher-level (HTTP) d. Digital envelope
format 8. The use of e-mail for a firewall system is under
application-level firewall.
GROUP 12 QUIZ: ENTERPRISE RESOURCE a. True
PLANNING SYSTEMS b. False
c. Maybe
1. One of the functions that protocols perform is the d. I don’t know
promotion of compatibility among network devices 9. Which of the following are not used by businesses and
a. True organizations in improving their security, assurance, and
b. False trust?
2. Theft of passwords is an example of Intranet risks I. Digital Authentication
under “risks to consumers”. II. Encryption
a. True III. Firewalls
b. False IV. Seals of Assurance
3. This is a kind of security protocol that gives security V. Network Topologies
of transactions in the Web. VI. Value-added Network
a. Private Enhanced Mail a. I, II, III, and IV
b. Privacy Enhanced Messaging b. I, II, III, IV, and V
c. Private Communications Technology c. V and VI
d. Privacy Communications Technology d. None of the above
4. An electronic commerce model where online 10. Electronic audit trails need to be developed that
transactions only involve the manufacturers, will enable the auditor to review transactions at frequent
wholesalers, retailers etc. intervals or as they occur.
a. Business to Business a. False
 b. Maybe 2. The Internet uses three types of addresses for
c. True communication. One of them is _______ that is used
d. I have no idea as the address that defines the path to a facility or
11. This can be applied to any topology. file on the Web.
a. Hierarchy Topology a. URL Address
b. E-mail Address
b. Ring Topology
c. IP Address
c. Bus Topology
d. Home Address
d. Client-Server Topology
3. It is the document format used to produce Web
12. The structure is applicable to firms with many pages. It defines the page layout, fonts, and graphic
organizational levels and must be controlled from a elements as well as hypertext link to other
central location. documents or the web.
a. Hierarchy Topology a. HMTL
b. Ring Topology b. HTTPS
c. Bus Topology c. HTML
d. Client-Server Topology d. HTTP
4. Which of the following are the fundamental
components of Ceasar cipher:
a. key and algorithm
13. It is simple, reliable, and generally less costly to b. field and key
install than the ring topology. c. field and algorithm
a. Hierarchy Topology d. none of the above
b. Ring Topology 5. It is a nonprofit organization that has been
promoting ethical business practices through self-
c. Bus Topology
regulation since 1912.
d. Client-Server Topology
a. TRUSTe
14. This is a peer-to-peer arrangement in which all nodes
b. BBB
are of equal status.
c. VeriSign, Inc.
a. Hierarchy Topology
d. ICSA
b. Ring Topology
6. Which of the following are the implications for the
c. Bus Topology accounting profession:
d. Client-Server Topology a. data integrity
15. Which of the following is not a feature of Electronic b. access controls
Data Interchange (EDI)? c. confidentiality of data
a. EDI is an interorganization endeavor. d. all of the above
b. the information systems of the trading partners 7. It is implemented to reasserts the importance of
automatically process the transaction. privacy.
c. transaction information is transmitted in a a. Safe Harbor Agreement
standardized format. b. European Union
d. EDI reduces or even eliminates the need for data c. AICPA/CICA SysTrust
entry. d. Public key infrastructure
8. It is a form of masquerading to gain unauthorized
Group 12 access to a Web server and/or perpetrate an unlawful
1. The benefits attained from electronic commerce will act without revealing one’s identity.
depend on the degree of organizational commitment a. IP Spoofing
to it as a business strategy. This can occur on three b. SVN Flood attack
levels, except: c. Denial service attack
a. Information Level d. Distributed denial of service
b. Management Level 9. It is the procedure of shifting each letter in the
c. Transaction Level cleartext message the number of positions that the
d. Distribution Level key value indicates
a. Algebra
 b. Arithmetic
c. Algorithm
d. Calculus
10. These are files containing user information that are
created by the Web server of the site being visited.
a. Cache
b. Cookies
c. Candies
d. Data
11. It is a popular interactive service on the Internet that
lets thousands of people from around the world
engage in real-time communications via their
computers
a. Internet Relationship Chat
b. Internet Recess Chat
c. Internet Rising Chat
d. Internet Relay Chat
12. The most popular technique for establishing a
communication session in WANs.
a. Token Passing
b. Poling
c. Carrier Sensing
d. Data Collision
13. Describes a network of computers with a large
central computer (the host) at the hub that has direct
connections to a periphery of smaller computers.
a. Star Topology
b. Hierarchical Topology
c. Ring Topology
d. Bus Topology
14. The most popular LAN topology. It is so named
because the nodes are all connected to a common
cable – the bus.
a. Star Topology
b. Hierarchical Topology
c. Ring Topology
d. Bus Topology
15. All are benefits of EDI, except:
a. Data keying
b. Error Reduction
c. Carrier Sensing
d. Postage